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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
February 5, 1999
SHARED TECHNOLOGIES CELLULAR, INC.
(Exact name of registrant as specified in the charter)
<TABLE>
<S> <C> <C>
State of Delaware 1-13732 06-386411
(State of Incorporation) (Commission File No.) (IRS Employer Identification No.)
</TABLE>
100 Great Meadow Road, Suite 104
Wethersfield, Connecticut 06109
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (860) 258-2500
(Former name or former address, if change since last report)
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ITEM 5. OTHER EVENTS.
Effective February 5, 1999, Shared Technologies Cellular, Inc. (the
"Company") closed a $15 million private placement of equity with 20 investors,
led by Marshall Capital Management, Inc., an affiliate of Credit Suisse First
Boston, and a number of European-based institutional investors. Oakes,
Fitzwilliams & Co. S.A. of London acted as placement agent for the Company in
connection with the sales to the European investors.
Pursuant to a Securities Purchase Agreement entered into between the
Company and the investors (the "Securities Purchase Agreement"), the Company
issued an aggregate of 15,000 shares of a new Series C Convertible Preferred
Stock, $.01 per share, and Warrants to purchase an aggregate of 300,000 shares
of Common Stock, $.01 par value, of the Company. Each share of Series C
Convertible Preferred Stock is convertible into Common Stock of the Company in
accordance with the formula described below. The Company intends to use the
proceeds from the offering to repay approximately $5.5 million of outstanding
indebtedness and for general corporate purposes.
Description of Series C Convertible Preferred Stock. The following
description of the rights and preferences of the Series C Convertible Preferred
Stock is a summary, and is qualified in its entirety by reference to the entire
text of the Certificate of Designations, Preferences and Rights of the Series C
Convertible Preferred Stock (the "Certificate of Designation"), which is
attached as an exhibit to this Current Report on Form 8-K.
Voting. The holders of shares of Series C Convertible Preferred
Stock are not entitled to vote with respect to the business, management or
affairs of the Company.
For so long as any shares of Series C Convertible Preferred Stock
are outstanding, the following matters, however, will require the approval of
the holders of at least two-thirds of the then-outstanding shares of Series C
Convertible Preferred Stock:
(i) altering, changing, modifying or amending the terms
of the Series C Convertible Preferred Stock or the terms of any
other stock of the Company so as to adversely affect the Series C
Convertible Preferred Stock;
(ii) creating any new class or series of capital stock
having a preference over or ranking pari passu with the Series C
Convertible Preferred Stock as to redemption or distribution of
assets upon a Liquidation Event (as defined in the Certificate of
Designation) or any other liquidation, dissolution or winding up
of the Company;
(iii) increasing the authorized number of shares of
Series C Convertible Preferred Stock;
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(iv) reissuing any shares of Series C Convertible
Preferred Stock which have been converted or redeemed in
accordance with the terms of the Certificate of Designation;
(v) issuing any Pari Passu Securities or Senior
Securities (each as defined in the Certificate of Designation)
(other than non-convertible debt securities or debt securities
which are convertible into or exchangeable for Common Stock of
the Company or any other equity or convertible security of the
Company junior to the Series C Convertible Preferred Stock);
(vi) redeeming, declaring, paying or making any provision
for any dividend or distribution with respect to the Common Stock
of the Company or any other capital stock of the Company ranking
junior to the Series C Convertible Preferred Stock as to the
distribution of assets upon liquidation, dissolution or winding
up of the Company; and
(vii) issuing any Series C Convertible Preferred Stock
except pursuant to the terms of the Securities Purchase
Agreement, a copy of which is filed as an exhibit to this Current
Report on Form 8-K.
Dividends. The Series C Convertible Preferred Stock will not bear
dividends.
Liquidation. Upon the liquidation, dissolution or winding up of
the Company, the holders of Series C Convertible Preferred Stock, before any
distribution to the holders of Junior Securities (as defined in the Certificate
of Designation) but after payment to holders of Senior Securities, will be
entitled to receive an amount equal to the Stated Value (defined below) plus the
Premium (defined below) accrued on its Series C Convertible Preferred Stock in
accordance with the terms of the Certificate of Designation (the "Liquidation
Preference").
Conversion. Each share of Series C Convertible Preferred Stock is
convertible into shares of Common Stock of the Company in accordance with the
following formula:
Number of Shares of = Stated Value plus accrued Premium
Common Stock Issuable Conversion Price
The "Stated Value" is equal to $1,000 per share. The "Premium" is equal to 6%,
payable in Common Stock or cash, at the Company's option (subject to certain
conditions), upon conversion. The "Conversion Price" is equal to the lesser of
$7 and the Variable Conversion Price. The "Variable Conversion Price" is equal
to the average of the lowest Closing Bid Prices (as defined in the Certificate
of Designation) for the Common Stock of the Company on any five (5) consecutive
trading days during the period of fifteen (15) trading days immediately prior to
the conversion date. If the Company's Common Stock trades above $11 per share
(subject to adjustment upon the occurrence of certain events, including but not
limited to a stock split or dividend or a merger or
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consolidation of the Company) for ten (10) consecutive days, and if at all times
during such period, certain conditions set forth in the Certificate of
Designation are satisfied, the Conversion Price will be equal to $7 thereafter.
If, following conversion, the Company fails to deliver shares of
its Common Stock to an investor in accordance with the Certificate of
Designation, it may incur monetary and other penalties (including, in certain
circumstances, mandatory redemption of the Series C Convertible Preferred
Stock).
On February 5, 2004, all shares of Series C Convertible Preferred
Stock then outstanding will be automatically converted into shares of Common
Stock at the then-prevailing Conversion Price.
Conversion Limitations. The number of shares of Common Stock
issued upon conversion of all outstanding shares of Series C Convertible
Preferred Stock may not exceed the following amounts during the periods
specified (each, a "Conversion Limit Amount"):
<TABLE>
<CAPTION>
Conversion
Period Limit Amount
------ ------------
<S> <C>
During the 1st Year Following the Issue Date 3,975,000
During the 2nd Year Following the Issue Date 4,200,000
During the 3rd Year Following the Issue Date 4,425,000
During the 4th Year Following the Issue Date 4,650,000
Following the 4th Anniversary of the Issue Date 4,875,000
</TABLE>
The Conversion Limit Amount is subject to adjustment in accordance with the
terms of the Certificate of Designation. In addition, until the Company obtains
the approval of the holders of a majority of the Company's outstanding Common
Stock, the number of shares of Common Stock issued upon conversion of Series C
Convertible Preferred Stock or exercise of the Warrants may not exceed 19.99% of
the number of shares of Common Stock outstanding on February 5, 1999, or
1,512,661 shares. The Company has agreed to seek such stockholder approval (the
"Stockholder Approval") at a meeting of stockholders to be held no later than
May 31, 1999. As of the date of this Current Report, but for the limitation
described in the second preceding sentence, the 15,000 shares of Series C
Convertible Preferred Stock would be convertible into approximately 2,142,857
shares of Common Stock of the Company, or 28% of the total number of shares of
Common Stock issued and outstanding on February 5, 1999. Further, the total
number of shares of Common Stock issuable upon conversion of the Series C
Convertible Preferred Stock and exercise of the Warrants as of the date of this
Current Report, but for the aforementioned limitation, would be approximately
2,442,857 shares, or 32% of the total number of shares of Common Stock issued
and outstanding on February 5, 1999.
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Mandatory Conversion. The Company has the right to require
conversion of all of the outstanding shares of Series C Convertible Preferred
Stock at any time after February 5, 2000 if the Closing Bid Price for the
Company's Common Stock is greater than $15.00 for fifteen (15) consecutive
trading days, subject to satisfaction of certain conditions set forth in the
Certificate of Designation.
Mandatory Redemption. Each purchaser of Series C Convertible
Preferred Stock will have the right, upon the occurrence of a Mandatory
Redemption Event (as such term is defined in the Certificate of Designation,
which term includes, among other things, failure to receive the Stockholder
Approval by May 31, 1999 ), to require the Company to redeem all or any part of
such purchaser's Series C Convertible Preferred Stock for a price (the
"Mandatory Redemption Price") equal to the greater of (a) the Liquidation
Preference of the shares being redeemed multiplied by 115% and (b) an amount
calculated on the basis of the applicable Conversion Price and the price at
which the Common Stock of the Company is then trading.
If the Corporation fails to pay the Mandatory Redemption Price
within ten (10) business days of the mandatory redemption date, the holder of
Series C Convertible Preferred Stock shall have the right to regain its rights
as such a holder and, upon written notice to such effect from the holder, the
Company shall return to such holder the certificates representing the Series C
Convertible Preferred Stock delivered to the Company in connection with the
mandatory redemption. In such event, the Conversion Price otherwise applicable
to future conversions of the Series C Convertible Preferred Stock shall be
reduced by one percent for each day beyond such tenth business day in which the
failure to pay continued, until the date of such notice, but the maximum
reduction of the Conversion Price shall be fifty percent.
Optional Redemption. The Company will have the right, upon the
satisfaction of certain Optional Redemption Conditions (as defined in the
Certificate of Designation), to redeem any Series C Convertible Preferred Stock
submitted for conversion at a Conversion Price that is less than $7 (subject to
adjustment upon the occurrence of certain events set forth in the Certificate of
Designation) for a price equal to an amount representing an annualized return of
110% on the Stated Value of the Series C Convertible Preferred Stock being
redeemed, plus accrued Premium.
Preemptive Rights. Pursuant to the Securities Purchase Agreement,
each purchaser of the Series C Convertible Preferred Stock will have the right,
upon the issuance of certain equity securities by the Company, to either
purchase a pro rata share of such securities or, at the option of such
purchaser, to exchange all or any part of such purchaser's shares of Series C
Convertible Preferred Stock for an equal amount of such securities.
Description of the Warrants. Pursuant to the Securities Purchase
Agreement, each investor received a Warrant for the purchase of 20,000 shares of
Common Stock of the Company for each $1 million of Series C Convertible
Preferred Stock issued. The Warrants are exercisable at $9 per share (subject to
adjustment upon the occurrence of certain events set forth in the Warrants). The
Warrants will expire five (5) years after the date of issuance, and are subject
to
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mandatory exercise, subject to certain conditions set forth therein, if the
Company's Common Stock trades at or above $18 per share (subject to adjustment
upon the occurrence of certain events set forth in the Warrants) for five (5)
consecutive trading days. Cashless exercise is permitted under the terms of the
Warrants and is required for any exercise after February 5, 2001.
If, following exercise of the Warrants, the Company fails to
deliver shares of its Common Stock to an investor in accordance with the terms
of the Warrants, it may incur monetary and other penalties.
Description of the Registration Rights Agreement. In accordance with the
Securities Purchase Agreement, the Company entered into a Registration Rights
Agreement with the investors, pursuant to which the Company is required, within
thirty (30) days after February 5, 1999, to file with the Securities and
Exchange Commission a registration statement on Form S-3 covering the resale of
the Common Stock issuable upon conversion of the Series C Convertible Preferred
Stock and exercise of the Warrants. The Company may incur monetary and other
penalties (including in certain circumstances mandatory redemption of the Series
C Convertible Preferred Stock) in the event that such registration statement is
not filed within such 30-day period or declared effective in accordance with the
terms of the Registration Rights Agreement, or if such registration statement
becomes unavailable for the resale of shares of Common Stock of the Company and
such unavailability continues for a period set forth in the Registration Rights
Agreement.
ITEM 7. EXHIBITS.
4.1 Certificate of Designations, Preferences and Rights of the Series C
Convertible Preferred Stock of Shared Technologies Cellular, Inc. dated
January 28, 1999.
4.2 Securities Purchase Agreement among the Company and the Purchasers dated
as of January 28, 1999.
4.3 Registration Rights Agreement among the Company and the Purchasers dated
as of January 28, 1999.
4.4 Form of Warrant to Purchase Common Stock of the Company issued to the
Purchasers.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant had duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: February 12, 1999 SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
--------------------------------
Name: Vincent DiVincenzo
Title: Chief Financial Officer
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CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
OF THE
SERIES C CONVERTIBLE PREFERRED STOCK
OF
SHARED TECHNOLOGIES CELLULAR, INC.
PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW
Shared Technologies Cellular, Inc., a Delaware corporation (the
"Corporation"), hereby certifies that the following resolutions were adopted by
the Board of Directors of the Corporation pursuant to the authority of the Board
of Directors as required by Section 151 of the Delaware General Corporation Law.
RESOLVED, that pursuant to the authority granted to the Board of
Directors in accordance with the provisions of the Corporation's Certificate of
Incorporation, the Board of Directors hereby authorizes a series of the
Corporation's previously authorized Preferred Stock, par value $.01 per share
(the "Preferred Stock"), and hereby states the designation and number of shares,
and fixes the relative rights, preferences, privileges and restrictions thereof
as follows:
1. DESIGNATION AND AMOUNT.
The designation of this series, which consists of fifteen thousand
shares of Preferred Stock, is the "Series C Convertible Preferred Stock" (the
"Series C Preferred Stock") and the face amount of each share of Series C
Preferred Stock (each, a "Preferred Share" and collectively, the "Preferred
Shares") shall be One Thousand Dollars ($1,000) per Preferred Share (the "Stated
Value"). The date on which the Preferred Shares are issued and sold pursuant to
the Securities Purchase Agreement, dated as of January 28, 1999, between the
Company and the Purchasers named therein (the "Securities Purchase Agreement")
is referred to herein as the "Issue Date". The holders of Preferred Shares are
each referred to as a "Holder" and, collectively, as the "Holders".
2. DIVIDENDS.
The Series C Preferred Stock will not bear dividends.
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3. PRIORITY.
(a) Payment upon Dissolution.
(i) Upon the occurrence of (x) any insolvency or bankruptcy
proceedings, or any receivership, liquidation, reorganization or other similar
proceedings in connection therewith, commenced by the Corporation or by its
creditors, as such, or relating to its assets or (y) the dissolution or other
winding up of the Corporation whether total or partial, whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy proceedings,
or (z) any assignment for the benefit of creditors or any marshalling of the
material assets or material liabilities of the Corporation (each, a "Liquidation
Event"), no distribution shall be made to the holders of any shares of Junior
Securities (as defined below) unless, following the payment of preferential
amounts on all Senior Securities (as defined below), each Holder shall have
received the Liquidation Preference (as defined below) with respect to each
Preferred Share then held by such Holder. In the event that upon the occurrence
of a Liquidation Event, and following the payment of preferential amounts on all
Senior Securities (as defined below), the assets available for distribution to
the Holders and the holders of Pari Passu Securities are insufficient to pay the
Liquidation Preference with respect to all of the outstanding Preferred Shares
and the preferential amounts payable to such holders, the entire assets of the
Corporation shall be distributed ratably among the Preferred Shares and the
shares of Pari Passu Securities in proportion to the ratio that the preferential
amount payable on each such share (which shall be the Liquidation Preference in
the case of a Preferred Share) bears to the aggregate preferential amount
payable on all such shares.
(ii) The "Liquidation Preference" with respect to a Preferred
Share shall mean an amount equal to the Stated Value of such Preferred Share
plus the Premium (as defined below) accrued on such Preferred Share in
accordance with the terms hereof. "Junior Securities" shall mean the Common
Stock and all other capital stock of the Corporation that are not Pari Passu
Securities or do not have a preference over the Series C Preferred Stock in
respect of redemption or distribution upon liquidation. "Pari Passu Securities"
shall mean any securities ranking pari passu with the Series C Preferred Stock
in respect of redemption or distribution upon liquidation. "Senior Securities"
shall mean (i) any debt issued or assumed by the Corporation and (ii) any
securities of the Corporation which by their terms have a preference over the
Series C Preferred Stock in respect of redemption or distribution upon
liquidation.
4. CONVERSION.
(a) Right to Convert. Each Holder shall have the right to convert, at
any time and from time to time after the Issue Date, all or any part of the
Preferred Shares held by such Holder into such number of fully paid and
non-assessable shares ("Conversion Shares") of the Common Stock as is determined
in accordance with the terms hereof (a "Conversion").
(b) Conversion Notice. In order to convert Preferred Shares, a Holder
shall send by facsimile transmission, at any time prior to 11:59 p.m., eastern
time, on the date on which such Holder wishes to effect such Conversion (the
"Conversion Date"), (i) a notice of conversion (a "Conversion
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Notice"), in substantially the form of Exhibit A hereto, to the Corporation and
to the Corporation's transfer agent for the Common Stock (the "Transfer Agent")
stating the number of Preferred Shares to be converted, the amount of Premium
(as defined below) accrued thereon, the applicable Conversion Price (as defined
below) and a calculation of the number of shares of Common Stock issuable upon
such Conversion and (ii) a copy of the certificate or certificates representing
the Preferred Shares being converted. The Holder shall thereafter send the
original of the Conversion Notice and of such certificate or certificates to the
Transfer Agent. The Corporation shall issue a new certificate for Preferred
Shares in the event that less than all of the Preferred Shares represented by a
certificate delivered to the Corporation in connection with a Conversion are
converted. Except as otherwise provided herein, upon delivery of a Conversion
Notice by a Holder in accordance with the terms hereof, such Holder shall, as of
the applicable Conversion Date, be deemed for all purposes to be record owner of
the Common Stock to which such Conversion Notice relates. In the case of a
dispute between the Corporation and a Holder as to the calculation of the
Conversion Price or the number of Conversion Shares issuable upon a Conversion,
the Corporation shall issue to such Holder the number of Conversion Shares that
are not disputed within the time frames specified in paragraph 4(e) below and
shall submit the disputed calculations to its independent accountant within one
(1) Business Day of receipt of such Holder's Conversion Notice. The Corporation
shall cause such accountant to calculate the Conversion Price as provided herein
and to notify the Corporation and such Holder of the results in writing no later
than five (5) Business Days following the Corporation's receipt of such Holder's
Conversion Notice (such 5th Business Day being referred to herein as the
"Disputed Share Calculation Date"). Such accountant's calculation shall be
deemed conclusive absent manifest error. The fees of any such accountant shall
be borne by the party whose calculations were most at variance with those of
such accountant.
(c) Number of Conversion Shares; Conversion Price. The number of
Conversion Shares to be delivered by the Corporation pursuant to a Conversion
shall be determined in accordance with the following formula:
SV + P
CP
where SV represents the aggregate Stated Value of the Preferred
Shares to be converted,
P represents the aggregate Premium (i) accrued on such
Preferred Shares and (ii) eligible for payment by the
Corporation in Conversion Shares, it being understood that,
unless each of the Premium Share Conditions (as defined in
paragraph 4(g) below) is satisfied or waived by the Holder of
such Preferred Shares, the Corporation may not pay accrued
Premium in shares of Common Stock and must pay such Premium on
the applicable Delivery Date (as defined below) in immediately
available funds in accordance with the terms of this
Certificate, and
CP represents the Conversion Price (as defined below) in
effect on the applicable Conversion Date.
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"Premium" with respect to a Preferred Share shall be determined in accordance
with the following formula:
(SV)(.06)(N)
365
where SV represents the Stated Value of such Preferred Share, and
N represents the number of days elapsed from the Issue Date
through and including the Conversion Date relating to such
Preferred Share .
Subject to adjustment as provided elsewhere herein, "Conversion Price" shall
mean the lesser of the Fixed Conversion Price and the Variable Conversion Price
(each as defined below); provided, however, that, if (i) during any period of
ten (10) consecutive Trading Days, the Closing Bid Price for the Common Stock on
each such Trading Day is greater than $11.00 (subject to adjustment for the
events specified in Section 6 hereof) and (ii) at all times during such period
of ten consecutive Trading Days, (x) a registration statement filed under the
Securities Act shall be effective and available to the Holders for the sale of
all of the Conversion Shares into which the Preferred Shares and Warrants (as
defined in the Securities Purchase Agreement, the "Warrants") then outstanding
are convertible or exercisable, as the case may be (without regard to any
restriction or limitation on the conversion thereof), or such Conversion Shares
may be sold under Rule 144(k), (y) the Common Stock shall be listed on the
Nasdaq SmallCap Market, the Nasdaq National Market System or the New York Stock
Exchange, and (z) trading in the Common Stock, or trading generally, shall not
have been suspended by the principal market on which the Common Stock is traded,
"Conversion Price" with respect to all Conversion Notices delivered after the
end of such ten consecutive Trading Day period shall be the Fixed Conversion
Price. "Fixed Conversion Price" shall mean the lesser of (A) $7.00 and (B) the
product of the average Closing Bid Price for the Common Stock during the period
of fifteen (15) Trading Days occurring immediately prior to the Issue Date times
one hundred and fifteen percent (115%)(as adjusted, in the case of (A) and (B),
for the events specified in Section 6 below). "Variable Conversion Price" shall
mean the average of the lowest Closing Bid Prices for the Common Stock occurring
on any five (5) consecutive Trading Days during the period of fifteen (15)
Trading Days ending on the Trading Day immediately prior to (but not including)
the applicable Conversion Date
(d) Certain Definitions. "Trading Day" means any day on which the
Common Stock is purchased and sold on the principal securities exchange or
market on which the Common Stock is then listed or traded. "Closing Bid Price"
means, with respect to the Common Stock, the closing bid price for the Common
Stock occurring on a given Trading Day on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg
Financial Markets or, if Bloomberg Financial Markets is not then reporting such
prices, by a comparable reporting service of national reputation selected by the
Corporation and reasonably acceptable to each Holder of the then outstanding
Preferred Shares (collectively, "Bloomberg") or if the foregoing does not apply,
the last reported bid price of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg, or, if
no bid price is reported for such security by Bloomberg, the average of the bid
prices of all market makers for such security as reported in the "pink sheets"
by
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the National Quotation Bureau, Inc. (collectively, the "Applicable Reporting
Entity"). If the Closing Bid Price cannot be calculated for such security on any
of the foregoing bases, the Closing Bid Price of such security shall be the fair
market value as reasonably determined by an investment banking firm selected by
all of the Holders of Preferred Shares, and reasonably acceptable to the
Corporation, with the costs of such appraisal to be borne by the Corporation.
"Closing Trade Price" means, with respect to the Common Stock, the last sale
price reported for the Common Stock on a given Trading Day on the principal
securities exchange or trading market where such security is listed or traded as
reported by the Applicable Reporting Entity or if no sale price was reported by
the Applicable Reporting Entity on such Trading Day, the last sale price
reported by the Applicable Reporting Entity on the Trading Day on which such
prices were last reported immediately preceding such Trading Day. "Business Day"
means any day on which the New York Stock Exchange and commercial banks located
in the City of New York are open for business.
(e) Delivery of Common Stock Upon Conversion. Upon receipt of a
Conversion Notice from a Holder pursuant to paragraph 4(b) above, the
Corporation shall, on or before the close of business on the latest to occur of
(i) the third (3rd) Business Day following the Conversion Date set forth in such
Conversion Notice, (ii) the Business Day immediately following the day on which
the certificates representing the Preferred Shares are delivered by such Holder
to the Corporation or the Transfer Agent, and (iii) with respect to Conversion
Shares that are the subject of a dispute as described in paragraph 4(b) above,
the Business Day immediately following the Disputed Share Calculation Date (the
latest of such Business Days being referred to herein as the "Delivery Date"),
issue and deliver or cause to be delivered to such Holder the number of
Conversion Shares to which such Holder is entitled to receive as provided
herein. The Corporation shall effect delivery of Conversion Shares to a Holder
by, as long as the Transfer Agent participates in the Depository Trust Company
("DTC") Fast Automated Securities Transfer program ("FAST"), crediting the
account of such Holder or its nominee at DTC (as specified in the applicable
Conversion Notice) with the number of Conversion Shares required to be
delivered, no later than the close of business on such Delivery Date. In the
event that Transfer Agent is not a participant in FAST or if a Holder so
specifies in a Conversion Notice or otherwise in writing on or before the
Conversion Date, the Corporation shall effect delivery of Conversion Shares by
delivering to the Holder or its nominee physical certificates representing such
Conversion Shares, no later than the close of business on such Delivery Date. If
any Conversion would create a fractional Conversion Share, such fractional
Conversion Share shall be disregarded and the number of Conversion Shares
issuable upon such Conversion, in the aggregate, shall be the rounded to the
nearest whole number of Conversion Shares. Conversion Shares delivered to the
Holder shall not contain any restrictive legend as long as (A) the sale,
transfer, pledge or other disposition of such Conversion Shares is covered by an
effective registration statement, (B) such Securities have been publicly sold
pursuant to Rule 144 ("Rule 144"), or (C) such Conversion Shares can be sold
pursuant to Rule 144(k) under Securities Act of 1933, as amended (the
"Securities Act"), or any successor rule or provision.
(f) Failure to Deliver Conversion Shares.
(i) In the event that the Corporation fails for any reason to
deliver to a Holder certificates (without any restrictive legend in the
circumstances described in clause (A) or (B) of
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paragraph 4(e) above) representing the number of Conversion Shares specified in
the applicable Conversion Notice on or before the Delivery Date therefor (a
"Conversion Default") as a result of any willful action or any willful failure
to act on the part of the Corporation, and such failure to deliver certificates
continues for ten (10) Business Days following the delivery of written notice
thereof from such Holder (such tenth Business Day being referred to herein as
the "Conversion Default Date"), the Corporation shall pay to such Holder
payments ("Conversion Default Payments") in the amount of (i) "N" multiplied by
(ii) the aggregate Stated Value of the Preferred Shares which are the subject of
such Conversion Default multiplied by (iii) one percent (1%), where "N" equals
the number of days elapsed between the Conversion Default Date and the earlier
to occur of (A) the date on which all of the certificates (without any
restrictive legend in the circumstances described in clause (A), (B) or (C) of
paragraph 4(e) above) representing such Conversion Shares are issued and
delivered to such Holder, (B) the date on which such Preferred Shares are
redeemed pursuant to the terms hereof and (C) the date on which a Withdrawal
Notice (as defined below) is delivered to the Corporation. Amounts payable under
this subparagraph (f) shall be paid to the Holder in immediately available funds
on or before the fifth (5th) Business Day of the calendar month immediately
following the calendar month in which such amounts have accrued.
(ii) In the event that a Holder has not received certificates
representing the Conversion Shares by the tenth (10th) Business Day following a
Conversion Default as a result of any willful action or any willful failure to
act on the part of the Corporation, such Holder may, upon written notice (a
"Withdrawal Notice") delivered to the Corporation on such Business Day or on any
Business Day thereafter (unless, prior to the delivery of such notice, such
Conversion Shares are delivered to such Holder), withdraw its Conversion Notice
with respect to such Conversion Shares and regain its rights as a Holder of the
Preferred Shares that are the subject of such Conversion Default. In such event,
the Conversion Price that would otherwise be in effect when such Preferred
Shares are thereafter converted in accordance with the terms hereof shall be
reduced by one percent (1%) for each day occurring during the period immediately
following such 10th Business Day until the day on which the such Holder delivers
a Withdrawal Notice to the Corporation; provided, however, that the maximum
percentage by which such Conversion Price may be reduced hereunder shall be
fifty percent (50%). (For example, if such Conversion Default were to continue
for five days following such 10th Business Day, such Conversion Price would be
reduced by 5%; if for ten days, by 10%; and for fifty days or more, 50%, so that
the number of Conversion Shares deliverable upon conversion of such Preferred
Shares would be increased proportionately). Upon delivery by a Holder of a
Withdrawal Notice, such Holder shall retain all of such Holder's rights and
remedies with respect to the Corporation's failure to deliver such Conversion
Shares (including without limitation the right to receive the cash payments
specified in subparagraph 4(f)(i) above).
(iii) In addition to any other remedies provided herein, each
Holder shall have the right to pursue actual damages for the Corporation's
failure to issue and deliver Conversion Shares on the applicable Delivery Date
(including, without limitation, damages relating to any purchase of shares of
Common Stock by such Holder to make delivery on a sale effected in anticipation
of receiving Conversion Shares upon Conversion, such damages to be in an amount
equal to (A) the aggregate amount paid by such Holder for the shares of Common
Stock so purchased minus (B) the aggregate Conversion Price for such Conversion
Shares, and such Holder shall have the right to pursue all other
<PAGE> 7
remedies available to it at law or in equity (including, without limitation, a
decree of specific performance and/or injunctive relief).
(g) Premium Share Conditions. The Corporation's right to pay accrued
Premium in Conversion Shares upon conversion of a Preferred Share is conditioned
upon the satisfaction of each of the following conditions (the "Premium Share
Conditions"):
(i) the number of shares of Common Stock authorized, unissued
and unreserved for all other purposes, or held in the Corporation's treasury, is
sufficient to pay such Premium in Conversion Shares;
(ii) the Common Stock is authorized for quotation on the
Nasdaq SmallCap Market or the Nasdaq National Market or for listing or quotation
on the New York Stock Exchange or any other national securities exchange and
trading in the Common Stock on such market or exchange has not been suspended;
(iii) the registration statement required to be maintained by
the Corporation (the "Registration Statement") pursuant to a registration rights
agreement by and among the Corporation and the Purchasers named therein (the
"Registration Rights Agreement") is effective and available for the sale of the
Conversion Shares issuable pursuant to the conversion of all of the Preferred
Shares and exercise of all of the Warrants then outstanding, or sales of such
Conversion Shares may be made pursuant to Rule 144(k);
(iv) no Mandatory Redemption Event (as defined herein) has
occurred and is continuing; and
(v) such payment of Premium in Conversion Shares will not
violate the limitations set forth in Section 5 below.
In the event that any Premium Share Condition is not satisfied as of the
Conversion Date for a Preferred Share, the Premium accrued on such Preferred
Share shall be payable by the Corporation to the Holder thereof in immediately
available funds on the Delivery Date immediately following such Conversion Date.
If the Corporation fails to deliver the amount of such Premium in immediately
available funds to a Holder on or before the close of business on the Delivery
Date therefor (a "Premium Cash Default "), such amount will bear interest at an
annual rate equal to the lower of (x) ten percent (10%) and (y) the highest
interest rate permitted by applicable law (the "Default Interest Rate"), accrued
on a daily basis from and after such Delivery Date until such amount is paid in
full.
(h) Conversion at Maturity. On the date which is five (5) years
following the Issue Date (the "Maturity Date"), each Preferred Share then
outstanding shall be automatically converted into the number of shares of Common
Stock equal to the Liquidation Preference of such shares divided by the
Conversion Price then in effect (a "Conversion at Maturity"); provided, however,
that if, on the Maturity Date, (i) the number of shares of Common Stock
authorized, unissued and unreserved for all other purposes, or held in the
Corporation's treasury, is not sufficient to effect the issuance and delivery
<PAGE> 8
of the number of Conversion Shares into which all outstanding Preferred Shares
are then convertible, (ii) the Common Stock is not designated for quotation or
listed on the Nasdaq SmallCap Market, the Nasdaq National Market or the New York
Stock Exchange or trading in the Common Stock on such market or exchange has
been suspended, or (iii) a Mandatory Redemption Event (as defined herein) has
occurred and is continuing, each Holder shall have the option, upon written
notice to the Corporation, to retain its rights as a holder of Preferred Shares,
including without limitation, the right to convert such Preferred Shares in
accordance with the terms of paragraphs 4(a) through 4(f) hereof and, upon
delivery of such notice, such Preferred Shares shall not be subject to a
Conversion at Maturity hereunder until the thirtieth (30th) day following the
later of (a) the date on which the event specified (i), (ii) or (iii) is no
longer continuing and (b) the date on which the Corporation delivers to each
Holder written notice to such effect, and in such event, such thirtieth day
shall be deemed to be the Maturity Date for purposes of this Certificate of
Designation. If a Conversion at Maturity occurs, the Corporation and each Holder
shall follow the procedures for Conversion set forth in this Section 4, with the
Maturity Date deemed to be the Conversion Date, except that the Holder shall not
be required to send a Conversion Notice as contemplated by paragraph 4(b).
5. CONVERSION LIMITATIONS.
In no event shall a Holder be permitted to convert any Preferred Shares
in excess of the number of such shares, upon the Conversion of which:
(a) the number of Conversion Shares to be issued pursuant to such
Conversion, when added to the number of shares of Common Stock issued pursuant
to all prior Conversions of Preferred Shares and all prior exercises of the
Warrants by the Holders thereof, would exceed 19.99% of the number of
outstanding shares of Common Stock on the Issue Date (subject to equitable
adjustments from time to time for the events described in Section 6 below) (the
"Cap Amount"), except that such limitation shall not apply in the event that (i)
the Corporation obtains the approval of the holders of a majority of the
Corporation's Common Stock for the issuance of Common Stock in excess of the Cap
Amount ("Stockholder Approval") or (ii) the Holders of a majority of the number
of Preferred Shares then outstanding obtain an opinion of counsel reasonably
satisfactory to the Corporation that such approval is not required. Until
Stockholder Approval or such opinion is obtained, no purchaser of Preferred
Shares pursuant to the Securities Purchase Agreement (each, a "Purchaser" and
together the "Purchasers") shall be issued, upon Conversion of the Preferred
Shares, Conversion Shares in an amount greater than the product of (A) the Cap
Amount times (B) a fraction, the numerator of which is the number of Preferred
Shares issued to such Purchaser pursuant to the Securities Purchase Agreement
and the denominator of which is the aggregate amount of all of the Preferred
Shares issued to the Purchasers pursuant to the Securities Purchase Agreement
(the "Cap Allocation Amount"). In the event that any Purchaser shall sell or
otherwise transfer any of such Purchaser's Preferred Shares, the transferee
shall be allocated a pro rata portion of such Purchaser's Cap Allocation Amount.
In the event that any Holder converts all of such Holder's Preferred Shares into
a number of Conversion Shares which, in the aggregate, is less than such
Holder's Cap Allocation Amount, then the difference between such Holder's Cap
Allocation Amount and the number of Conversion Shares actually issued to such
Holder shall be allocated to the respective Cap Allocation Amounts of the
remaining Holders of Preferred Shares on a pro rata basis in proportion to the
number of Preferred Shares then held by each
<PAGE> 9
such Holder; notwithstanding anything to the contrary set forth herein, from and
after May 31, 1999, any Holder whose Cap Allocation Amount represents one
hundred and seventy-five percent (175%) or less of (i) the number of Conversion
Shares into which the Preferred Shares and Warrants then held by such Holder are
convertible or exercisable at the Conversion Price or the Exercise Price, as the
case may be, then in effect (without regard to any restrictions or limitations
on such conversion or exercise) plus (ii) the number of Conversion Shares and
Warrant Shares into which such Holder has previously converted Preferred Shares
and exercised the Warrants, respectively, shall have the right from time to time
to require the Corporation, upon written notice, at such Holder's option (A) to
seek Stockholder Approval by means of a special meeting of stockholders to be
held as soon as practicable following the Corporation's receipt of such notice,
but in any case within one hundred and twenty five (125) days following such
receipt, and to recommend such approval to its stockholders at such special
meeting, or (B) to institute proceedings and take all other action necessary to
delist the Common Stock from the Nasdaq SmallCap Market, in which case, the
limitation set forth in this paragraph (a) shall not apply at any time following
such delisting;
(b) the number of Conversion Shares to be issued pursuant to such
Conversion, when added to the number of shares of Common Stock issued pursuant
to all prior Conversions of Preferred Shares by the Holders thereof, would
exceed the following amounts (each of which shall be subject to equitable
adjustments from time to time for the events described in Section 6 below)
during the periods specified (each, a "Conversion Limit Amount"):
<TABLE>
<CAPTION>
Period Conversion Limit Amount
<S> <C>
During the 1st Year Following the Issue Date 3,975,000
During the 2nd Year Following the Issue Date 4,200,000
During the 3rd Year Following the Issue Date 4,425,000
During the 4th Year Following the Issue Date 4,650,000
Following the 4th Anniversary of the Issue Date 4,875,000
</TABLE>
No Purchaser shall be issued, upon Conversion of the Preferred Shares,
Conversion Shares in an amount greater than the product of (A) the applicable
Conversion Limit Amount times (B) a fraction, the numerator of which is the
number of Preferred Shares issued to such Purchaser pursuant to the Securities
Purchase Agreement and the denominator of which is the aggregate amount of all
of the Preferred Shares issued to the Purchasers pursuant to the Securities
Purchase Agreement (the "Conversion Limit Allocation Amount"). In the event that
any Purchaser shall sell or otherwise transfer any of such Purchaser's Preferred
Shares, the transferee shall be allocated a pro rata portion of such Purchaser's
Conversion Limit Allocation Amount. In the event that any Holder converts all of
such Holder's Preferred Shares into a number of Conversion Shares which, in the
aggregate, is less than such Holder's Conversion Limit Allocation Amount, then
the difference between such Holder's
<PAGE> 10
Conversion Limit Allocation Amount and the number of Conversion Shares actually
issued to such Holder shall be allocated to the respective Conversion Limit
Allocation Amounts of the remaining Holders of Preferred Shares on a pro rata
basis in proportion to the number of Preferred Shares then held by each such
Holder.
(c) (x) the number of shares of Common Stock beneficially owned by such
Holder (other than shares of Common Stock issuable upon conversion of such
Preferred Shares or which would otherwise be deemed beneficially owned except
for being subject to a limitation on conversion or exercise analogous to the
limitation contained in this subparagraph (b)) plus (y) the number of shares of
Common Stock issuable upon the Conversion of such Preferred Shares, would be
equal to or exceed (z) 4.99% of the number of shares of Common Stock then issued
and outstanding. As used herein, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and the rules thereunder. To the extent that the limitation contained
in this paragraph 5(c) applies, the determination of whether Preferred Shares
are convertible (in relation to other securities owned by a Holder) and of which
Preferred Shares are convertible shall be in the sole discretion of such Holder,
and the submission of Preferred Shares for Conversion shall be deemed to be such
Holder's determination that such Preferred Shares are convertible pursuant to
the terms hereof, and the Corporation shall have no right or obligation
whatsoever to verify or confirm the accuracy of such determination. This
paragraph may be amended (i) in order to clarify an ambiguity or otherwise to
give effect to such limitation, by all of the Holders of Preferred Shares then
outstanding and (ii) for any other reason, with the further consent of the
holders of a majority of the shares of Common Stock then outstanding. Nothing
contained herein shall be deemed to restrict the right of a Holder to convert
Preferred Shares at such time as the Conversion thereof will not violate the
provisions of this subparagraph 5(c). The restriction contained in this
subparagraph 5(c) shall not apply (i) in the event of a Conversion at Maturity
or a Mandatory Conversion (as defined below) or (ii) with respect to any
Preferred Shares that were purchased from the Corporation pursuant to the
Securities Purchase Agreement by a purchaser that elected therein not to be
subject to the limitation contained in this paragraph 5(c).
6. ADJUSTMENTS TO CONVERSION PRICE.
(a) Adjustment to Fixed Conversion Price Due to Stock Split, Stock
Dividend, Etc. If, prior to the Conversion of all of the Preferred Shares, (A)
the number of outstanding shares of Common Stock is increased by a stock split,
a stock dividend on the Common Stock, a reclassification of the Common Stock,
the distribution to all or substantially all of the holders of Common Stock of
rights or warrants entitling them to subscribe for or purchase Common Stock at
less than the then current market price thereof (based upon the subscription or
exercise price of such rights or warrants at the time of the issuance thereof)
or other similar event, the Fixed Conversion Price shall be proportionately
reduced, or (B) the number of outstanding shares of Common Stock is decreased by
a reverse stock split, combination or reclassification of shares or other
similar event, the Fixed Conversion Price shall be proportionately increased. In
such event, the Corporation shall notify the Transfer Agent of such change on or
before the effective date thereof. For purposes hereof, the "market price" per
share of Common Stock on any date shall be the average Closing Trade Price for
the Common Stock on the five (5) consecutive Trading Days occurring immediately
prior to but not including the earlier of such date
<PAGE> 11
and the Trading Day before the "ex" date, if any, with respect to the issuance
or distribution requiring such computation. The term "'ex' date", when used with
respect to any issuance or distribution, means the first Trading Day on which
the Common Stock trades regular way in the market from which such average
Closing Trade Price is then to be determined without the right to receive such
issuance or distribution.
(b) Adjustment to Conversion Price During Reference Period. If, prior
to the Conversion of all of the Preferred Shares, the number of outstanding
shares of Common Stock is increased or decreased by a stock split, a stock
dividend on the Common Stock, a combination, a reclassification of the Common
Stock or other similar event, and such event takes place during the reference
period for the determination of the Conversion Price for any Conversion thereof,
the Conversion Price shall be calculated giving appropriate effect to the stock
split, stock dividend, combination, reclassification or other similar event for
all Trading Days occurring during such reference period.
(c) Adjustment Due to Merger, Consolidation, Etc. If, prior to the
Conversion of all of the Preferred Shares, there shall be any merger,
consolidation, business combination, tender offer, exchange of shares,
recapitalization, reorganization, redemption or other similar event, as a result
of which shares of Common Stock shall be changed into the same or a different
number of shares of the same or another class or classes of stock or securities
of the Corporation or another entity (an "Exchange Transaction"), then such
Holder shall (A) upon the consummation of such Exchange Transaction, have the
right to receive, with respect to any shares of Common Stock then held by such
Holder, or which such Holder is then entitled to receive pursuant to a
Conversion Notice previously delivered by such Holder (and without regard to
whether such shares contain a restrictive legend or are freely-tradable), the
same amount and type of consideration (including without limitation, stock,
securities and/or other assets) and on the same terms as a holder of shares of
Common Stock would be entitled to receive in connection with the consummation of
such Exchange Transaction (the "Exchange Consideration"), and (B) upon the
Conversion of Preferred Shares occurring subsequent to the consummation of such
Exchange Transaction (a "Subsequent Conversion"), have the right to receive the
Exchange Consideration which such Holder would have been entitled to receive in
connection with such Exchange Transaction had such shares been converted
immediately prior to such Exchange Transaction at the Conversion Price
applicable on the Conversion Date relating to such Subsequent Conversion, and in
any such case appropriate provisions shall be made with respect to the rights
and interests of such Holder to the end that the provisions hereof (including,
without limitation, provisions for the adjustment of the Conversion Price and of
the number of shares of Common Stock issuable upon a Conversion) shall
thereafter be applicable as nearly as may be practicable in relation to any
securities thereafter deliverable upon the Conversion of such Preferred Shares.
The Corporation shall not effect any Exchange Transaction unless (i) it first
gives to each Holder twenty (20) days prior written notice of such Exchange
Transaction (an "Exchange Notice"), and makes a public announcement of such
event at the same time that it gives such notice (it being understood that the
filing by the Corporation of a Form 8-K for the purpose of disclosing the
anticipated consummation of the Exchange Transaction shall constitute an
Exchange Notice for purposes of this provision) and (ii) the resulting successor
or acquiring entity (if not the Corporation) assumes by written instrument the
obligations of the Corporation hereunder, including the terms of this
subparagraph 6(c), and under the Securities Purchase Agreement and the
Registration Rights Agreement.
<PAGE> 12
(d) Distribution of Assets. If the Corporation or any of its
subsidiaries shall declare or make any distribution of cash, evidences of
indebtedness or other securities or assets (other than cash dividends or
distributions payable out of earned surplus or net profits for the current or
the immediately preceding year), or any rights to acquire any of the foregoing,
to holders of Common Stock (or to a holder of the common stock of any such
subsidiary) as a partial liquidating dividend, by way of return of capital or
otherwise, including any dividend or distribution in shares of capital stock of
a subsidiary of the Corporation (collectively, a "Distribution"), then, upon a
Conversion by a Holder occurring after the record date for determining
stockholders entitled to such Distribution, the applicable Conversion Price for
Preferred Shares not converted prior to the record date of a Distribution shall
be reduced by an amount equal to the fair market value of the assets so
distributed with respect to each share of Common Stock, such fair market value
to be determined by an investment banking firm selected by all of the holders of
Preferred Shares then outstanding and reasonably acceptable to the Corporation.
(e) Adjustment Pursuant to Other Agreements. In addition to and without
limiting in any way the adjustments provided in this Section 6, the Conversion
Price shall be adjusted as may be required by the provisions of the Registration
Rights Agreement and/or by the provisions of the Securities Purchase Agreement.
(f) No Fractional Shares. If any adjustment under this Section would
create a fractional share of Common Stock or a right to acquire a fractional
share of Common Stock, such fractional share shall be disregarded and the number
of shares of Common Stock issuable upon Conversion shall be rounded to the
nearest whole number of shares.
7. MANDATORY CONVERSION.
(a) Mandatory Conversion. The Corporation shall have the right, upon
the satisfaction of each of the Mandatory Conversion Conditions (as defined
below), to require conversion of all of the Preferred Shares outstanding on the
Mandatory Conversion Date (as defined below)(a "Mandatory Conversion "). In the
event of a Mandatory Conversion, the Corporation and each Holder shall follow
the procedures for Conversion set forth in Section 4 above, with the Mandatory
Conversion Date (as defined below) deemed to be the Conversion Date, except that
a Holder shall not be required to send a Conversion Notice as contemplated by
paragraph (b) of Section 4.
(b) Mandatory Conversion Notice. In order to effect a Mandatory
Conversion hereunder, the Corporation must deliver to each Holder written notice
thereof (a "Mandatory Conversion Notice") on or before 5:00 p.m. (eastern time)
on a Business Day (the "Mandatory Conversion Notice Date") that (i) occurs on or
before the third Business Day immediately following the last Trading Day of the
Mandatory Conversion Period (as defined below) and (ii) is not less than fifteen
(15) Trading Days prior to the date on which such Mandatory Conversion is to be
effected (the "Mandatory Conversion Date") and, at the same time that it
delivers such notice, the Corporation shall confirm delivery thereof with each
Holder by telephone, either personally or by voicemail message. Notwithstanding
the delivery by the Corporation of a Mandatory Conversion Notice, nothing
contained herein shall be
<PAGE> 13
deemed to limit in any way (i) the right of a Holder to convert Preferred Shares
prior to the Mandatory Conversion Date or (ii) the availability of any and all
remedies that are provided to a Holder hereunder, including without limitation
in the event that the Corporation fails to deliver Conversion Shares upon a
Mandatory Conversion as required by the terms of Section 4 hereof.
(c) Mandatory Conversion Conditions. The Mandatory Conversion
Conditions are as follows:
(i) at any time after the 365-day period following the
Closing Date, the Closing Bid Price shall have been
greater than $15.00 for fifteen (15) consecutive
Trading Days (such 15-Trading Day period being
referred to herein as a "Mandatory Conversion
Period");
(ii) during the Mandatory Conversion Period, on the
Mandatory Conversion Notice Date and at all times
during the period from the Mandatory Conversion
Notice Date through the Mandatory Conversion Date,
(x) a registration statement filed under the
Securities Act shall be effective and available to
the Holders for the sale of all of the Conversion
Shares into which the Preferred Shares and Warrants
then outstanding are convertible or exercisable, as
the case may be (without regard to any restriction or
limitation on the conversion thereof), or such
Conversion Shares may be sold under Rule 144(k), (y)
the Common Stock shall be listed on the Nasdaq
SmallCap Market, the Nasdaq National Market System or
the New York Stock Exchange, and (z) trading in the
Common Stock, or trading generally, shall not have
been suspended by the principal market on which the
Common Stock is traded;
(iii) the Corporation shall not have breached, at any time
prior to the Mandatory Conversion Date, any material
agreement or obligation hereunder or under the
Securities Purchase Agreement or the Registration
Rights Agreement; and
(iv) a Mandatory Redemption Event (as defined below) shall
not have occurred and be continuing as of the
Mandatory Conversion Notice Date or the Mandatory
Conversion Date.
8. REDEMPTION.
(A) Mandatory Redemption by the Holder.
(a) Mandatory Redemption. In the event that a Mandatory Redemption
Event (as defined below) occurs, each Holder shall have the right to require the
Corporation to redeem all or any portion of the Preferred Shares held by such
Holder (a "Mandatory Redemption") at the Mandatory Redemption Price (as defined
herein). In order to exercise its right to effect a Mandatory Redemption, a
Holder must deliver a written notice (a "Mandatory Redemption Notice") to the
Corporation at any
<PAGE> 14
time on or before 5:00 p.m. (eastern time) on the third (3rd) Business Day
following the Business Day on which the Mandatory Redemption Event to which such
Mandatory Redemption Notice relates is no longer continuing. The Mandatory
Redemption Notice shall specify the effective date of such Mandatory Redemption
(the "Mandatory Redemption Date") and the number of such shares to be redeemed.
(b) Mandatory Redemption Event. Each of the following events shall be
deemed a "Mandatory Redemption Event":
(i) the Corporation fails for any reason (including without
limitation as a result of not having a sufficient number of shares of Common
Stock authorized and reserved for issuance, or as a result of the limitation
contained in Section 5(a) hereof) to issue shares of Common Stock to a Holder
and deliver certificates representing such shares to such Holder as and when
required by the provisions hereof upon Conversion of any Preferred Shares, as a
result of any willful action or willful failure to act on the part of the
Corporation, and such failure continues for ten (10) Business Days;
(ii) the Corporation breaches, in a material respect, any
covenant or other material term or condition of this Certificate, the Securities
Purchase Agreement, the Registration Rights Agreement, or any other agreement,
document, certificate or other instrument delivered in connection with the
transactions contemplated thereby, and such breach continues for a period of
five (5) Business Days after written notice thereof to the Corporation from a
Holder;
(iii) any material representation or warranty made by the
Corporation in the Securities Purchase Agreement, the Registration Rights
Agreement or any other agreement, document, certificate or other instrument
delivered in connection with the transactions contemplated hereby or thereby is
inaccurate or misleading in any material respect as of the date such
representation or warranty was made;
(iv) the Registration Statement is not declared effective by
the one hundred and twenty fifth (125th) day following the Issue Date or if the
Registration Statement has been declared effective by such date and, while the
effectiveness of the Registration Statement is required to be maintained
pursuant to the terms of the Registration Rights Agreement, the effectiveness of
the Registration Statement lapses for any reason (including without limitation,
the issuance of a stop order) or is unavailable to the Holder for the sale of
Conversion Shares in accordance with the terms of the Registration Rights
Agreement, and such lapse or unavailability continues for a period of five (5)
consecutive Business Days (other than during a "Blackout Period" as that term is
defined in the Registration Rights Agreement), in any twelve (12) month period,
provided that such failure to be declared effective, lapse or unavailability
occurs as a result of any willful action or willful failure to act on the part
of the Corporation;
(v) the Common Stock is not quoted on the Nasdaq SmallCap
Market or the Nasdaq National Market or listed on the New York State Exchange,
or trading in the Common Stock on such market or exchange is suspended and such
suspension is in effect for more than five consecutive (5) Trading Days, and
such suspension or failure to be so quoted or listed occurs as a result
<PAGE> 15
of any willful action or willful failure to act on the part of the Corporation;
and
(vi) the Corporation does not obtain Stockholder Approval on
or before May 31, 1999.
(c) Mandatory Redemption Price. The "Mandatory Redemption Price" shall
be equal to the greater of (i) the Liquidation Preference of the Preferred
Shares being redeemed multiplied by one hundred and fifteen percent (115%) and
(ii) an amount determined by dividing the Liquidation Preference of the
Preferred Shares being redeemed by the Conversion Price in effect on the
Mandatory Redemption Date and multiplying the resulting quotient by the average
Closing Trade Price for the Common Stock on the five (5) Trading Days
immediately preceding (but not including) the Mandatory Redemption Date.
(d) Payment of Mandatory Redemption Price.
(i) The Corporation shall pay the Mandatory Redemption Price
to the Holder exercising its right to redemption on the later to occur of (i)
the fifth (5th) Business Day following the Mandatory Redemption Date and (ii)
the date on which the Preferred Shares being redeemed are delivered by the
Purchaser to the Corporation for cancellation (the "Mandatory Redemption Payment
Date").
(ii) If Corporation fails to pay the Mandatory Redemption
Price to the Holder on or before the Mandatory Redemption Date, the Holder shall
be entitled to interest thereon, from and after the Mandatory Redemption Payment
Date until the Mandatory Redemption Price has been paid in full, at an annual
rate equal to the Default Interest Rate.
(iii) If the Corporation fails to pay the Mandatory Redemption
Price within ten (10) Business Days of the Mandatory Redemption Date, then the
Holder shall have the right to regain its rights as a Holder of the Series C
Preferred Stock and, upon written notice to such effect from the Holder, the
Corporation shall return to such Holder the certificates representing the
Preferred Shares that were delivered to the Corporation in connection with such
Mandatory Redemption; in such event, the Conversion Price otherwise applicable
to future Conversions of the Preferred Shares shall be reduced by one percent
(1%) for each day beyond such 10th Business Day in which the failure to pay the
Mandatory Redemption Price continued until the date of such notice; provided,
however, that the maximum percentage by which such Conversion Price may be
reduced hereunder shall be fifty percent (50%).
(B) Optional Redemption By Corporation.
(a) Optional Redemption. The Corporation shall have the right, at any
time and from time to time, upon the satisfaction of each of the Optional
Redemption Conditions (as defined below), to redeem any Preferred Shares that
are submitted for Conversion at a Conversion Price that is less than $7.00
(subject to equitable adjustments from time to time for the events described in
Section 6
<PAGE> 16
hereof)(the "Optional Redemption Trigger Price") in accordance with the terms
hereof (an "Optional Redemption"). The date on which an Optional Redemption is
effected and the Optional Redemption Price (as defined below) is paid by the
Corporation to a Holder is referred to herein as an "Optional Redemption Date".
(b) Optional Redemption Notice. In order to effect an Optional
Redemption hereunder with respect to a Conversion of Preferred Shares at a
Conversion Price below the Optional Redemption Trigger Price, the Corporation
must deliver to the Holder seeking such Conversion written notice of such
Optional Redemption (an "Optional Redemption Notice") on or before 5:00 p.m.
(eastern time) on the Business Day immediately following the Conversion Date for
such Conversion and, at the same time that it delivers such notice, the
Corporation shall confirm delivery thereof with such Holder by telephone, either
personally or by voicemail message. Notwithstanding the foregoing, each Holder
shall have the right, at any time and from time to time, to deliver a written
request (an "Optional Redemption Request") to the Corporation and, upon delivery
of an Optional Redemption Request by a Holder to the Corporation, the
Corporation shall respond to such Holder in writing (an "Optional Redemption
Response") on or before 5:00 p.m. (eastern time) on the Business Day immediately
following the Business Day on which such Optional Redemption Request is
delivered to the Corporation. The Optional Redemption Response shall state
whether the Corporation intends to redeem such Holder's Preferred Shares in the
event that such Holder submits a Conversion Notice during the period of five (5)
Business Days following the Business Day on which the Company delivers an
Optional Redemption Response to such Holder (the "Optional Redemption Period")
with a Conversion Price that is less than the Optional Redemption Trigger Price.
In the event that the Corporation states in an Optional Redemption Response
delivered to a Holder that the Corporation intends to redeem Preferred Shares
that would otherwise be converted at a Conversion Price that is less than the
Optional Redemption Trigger Price, the Corporation must (subject to the
satisfaction of each of the Optional Redemption Conditions) redeem all or, if
the Corporation intends to redeem less than all, the percentage specified in the
Optional Redemption Response, of the Preferred Shares for which a Conversion
Notice or Notices may be delivered to the Corporation during the Optional
Redemption Period by such Holder with a Conversion Price that is less than the
Optional Redemption Trigger Price (in which case the Corporation shall not be
required to deliver an Optional Redemption Notice to such Holder). In the event
that (i) the Corporation fails to deliver an Optional Redemption Response to a
Holder on or before 5:00 p.m. on the Business Day immediately following the
Business Day on which such Holder delivers an Optional Redemption Request to the
Corporation or (ii) the Corporation states in an Optional Redemption Response
that it does not intend to redeem Preferred Shares during the related Optional
Redemption Period, the Corporation may not redeem any Preferred Shares for which
a Conversion Notice is submitted by such Holder during such Optional Redemption
Period.
(c) Optional Redemption Conditions. The Optional Redemption Conditions
are as follows:
<PAGE> 17
(i) the Corporation shall not have breached, at any time
prior to the Optional Redemption Date, any material
agreement or obligation hereunder or under the
Securities Purchase Agreement or the Registration
Rights Agreement which remains uncured as of the
Optional Redemption Date, including without
limitation, the Corporation's obligation to effect
Conversions in accordance with the terms hereof; and
(ii) a Mandatory Redemption Event shall not have occurred
and be continuing as of the Optional Redemption Date.
(d) Optional Redemption Price. The "Optional Redemption Price" to be
paid by the Corporation to a Holder in the event of an Optional Redemption shall
be equal to (A) the aggregate Stated Value of the Preferred Shares being
redeemed times a percentage such that the resulting product will represent an
annualized return on such Stated Value of one hundred and ten percent (110%)
from the Issue Date for such Preferred Shares through and including the related
Optional Redemption Date plus (B) all Premium accrued on such Preferred Shares
through and including such Optional Redemption Date.
(e) Payment of Optional Redemption Price.
(i) The Corporation shall pay the Optional Redemption Price by
wire transfer in immediately available funds to each Holder on or before 5:00
p.m. (eastern time) on the thirtieth (30th) day following the Conversion Date
for the Preferred Shares being redeemed (the "Optional Redemption Payment
Date").
(ii) If the Corporation fails to pay the Optional Redemption
Price by wire transfer in immediately available funds to a Holder on or before
the Optional Redemption Payment Date, (i) such Holder shall be entitled to
interest thereon, from and after the Optional Redemption Payment Date until the
Optional Redemption Price has been paid in full, at an annual rate equal to the
Default Interest Rate for the number of days elapsed from such Optional
Redemption Payment Date until such amount is paid in full, (ii) such Holder
shall have the option to regain, as of the date of delivery of written notice
thereof to the Corporation (a "Redemption Default Notice"), its rights as a
Holder of the Preferred Shares that were redeemed, in which case the Variable
Conversion Price for such Preferred Shares upon the subsequent conversion
thereof will be equal to the lesser of (x) the lowest Variable Conversion Price
occurring during the thirty day period immediately preceding the Optional
Redemption Date and (y) the Variable Conversion Price in effect on the
applicable Conversion Date (it being understood that such Holder may deliver a
Conversion Notice with respect to such Preferred Shares at any time following
delivery of a Redemption Default Notice to the Corporation) and (iii) the
Corporation shall not be entitled to effect an Optional Redemption thereafter
with respect to any Preferred Shares.
<PAGE> 18
9. MISCELLANEOUS.
(a) Transfer of Preferred Shares. A Holder may sell or transfer all or
any portion of the Preferred Shares to any person or entity as long as such sale
or transfer is the subject of an effective registration statement under the
Securities Act or is exempt from registration thereunder and otherwise is made
in accordance with the terms of the Securities Purchase Agreement. From and
after the date of such sale or transfer, the transferee thereof shall be deemed
to be a Holder. Upon any such sale or transfer, the Corporation shall, promptly
following the return of the certificate or certificates representing the
Preferred Shares that are the subject of such sale or transfer, issue and
deliver to such transferee a new certificate in the name of such transferee.
(b) Notices. Except as otherwise provided herein, any notice, demand or
request required or permitted to be given pursuant to the terms hereof, the form
or delivery of which notice, demand or request is not otherwise specified
herein, shall be in writing and shall be deemed delivered (i) when delivered
personally or by verifiable facsimile transmission on or before 5:00 p.m.,
eastern time, on a Business Day or, if such day is not a Business Day, on the
next succeeding Business Day, (ii) on the next Business Day after timely
delivery to an overnight courier and (iii) on the Business Day actually received
if deposited in the U.S. mail (certified or registered mail, return receipt
requested, postage prepaid), addressed to the parties as follows:
If to the Corporation:
Shared Technologies Cellular, Inc.
100 Great Meadow Road
Suite 100
Wethersfield, CT 06109
Attn: Legal Department
Tel: (860) 258-2500
Fax: (860) 258-2455
with a copy to:
Day, Berry & Howard LLP
260 Franklin Street
Boston MA 02110
Attn: Jeffrey A. Clopeck, Esq.
Tel: (617) 345-4600
Fax: (617) 345-4745
and if to any Holder, to such address for such Holder as shall be designated by
such Holder in writing to the Corporation.
(c) Lost or Stolen Certificate. Upon receipt by the Corporation of
evidence of the loss,
<PAGE> 19
theft, destruction or mutilation of a certificate representing Preferred Shares,
and (in the case of loss, theft or destruction) of indemnity or security
reasonably satisfactory to the Corporation, and upon surrender and cancellation
of such certificate if mutilated, the Corporation shall execute and deliver to
the Holder a new certificate identical in all respects to the original
certificate.
(d) No Voting Rights. Except as provided by applicable law and
paragraph 9(g) below, the Holders of the Preferred Shares shall have no voting
rights with respect to the business, management or affairs of the Corporation;
provided that the Corporation shall provide each Holder with prior notification
of each meeting of stockholders (and copies of proxy statements and other
information sent to such stockholders).
(e) Remedies, Characterization, Other Obligations, Breaches and
Injunctive Relief. The remedies provided to a Holder in this Certificate of
Designation shall be cumulative and in addition to all other remedies available
to such Holder under this Certificate of Designation or under any Transaction
Document (as defined in the Securities Purchase Agreement), at law or in equity
(including without limitation a decree of specific performance and/or other
injunctive relief), no remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing contained
herein shall limit such Holder's right to pursue actual damages for any failure
by the Corporation to comply with the terms of these Certificate of Designation.
The Corporation agrees with each Holder that there shall be no characterization
concerning this instrument other than as specifically provided herein. Amounts
set forth or provided for herein with respect to payments, conversion and the
like (and the computation thereof) shall be the amounts to be received by the
Holder hereof and shall not, except as expressly provided herein, be subject to
any other obligation of the Corporation (or the performance thereof). The
Corporation acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Holders and that the remedy at law for any such
breach may be inadequate. The Corporation agrees, in the event of any such
breach or threatened breach, each Holder shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.
(f) Failure or Delay not Waiver. No failure or delay on the part of a
Holder in the exercise of any power, right or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege.
(g) Protective Provisions.
So long as shares of Series C Preferred Stock are outstanding,
the Corporation shall not, without first obtaining the approval of the Holders
of at least two-thirds (2/3) of outstanding shares of Series C Preferred Stock:
(i) alter, change, modify or amend (x) the terms of
the Series C Preferred Stock in any way or (y) the terms of any other capital
stock of the Corporation so as to affect adversely the Series C Preferred Stock;
<PAGE> 20
(ii) create any new class or series of capital stock
having a preference over or ranking pari passu with the Series C Preferred Stock
as to redemption or distribution of assets upon a Liquidation Event or any other
liquidation, dissolution or winding up of the Corporation;
(iii) increase the authorized number of shares of
Series C Preferred Stock;
(iv) re-issue any shares of Series C Preferred Stock
which have been converted or redeemed in accordance with the terms hereof;
(v) issue any Pari Passu Securities or Senior
Securities (other than debt securities which may be convertible into or
exchangeable for Common Stock or any other equity or convertible security of the
Corporation junior to the Series C Preferred Stock);
(vi) redeem, or declare, pay or make any provision
for any dividend or distribution with respect to, the Common Stock or any other
capital stock of the Corporation ranking junior to the Series C Preferred Stock
as to the distribution of assets upon liquidation, dissolution or winding up of
the Corporation; or
(vii) issue any Series C Preferred Stock except
pursuant to the terms of the Securities Purchase Agreement.
In the event that the Holders of at least two-thirds of the outstanding
shares of Series C Preferred Stock agree to allow the Corporation to alter or
change the rights, preferences or privileges of the shares of Series C Preferred
Stock pursuant to the terms hereof, then the Corporation will deliver notice of
such approved change to the holders of the Series C Preferred Stock that did not
agree to such alteration or change (the "Dissenting Holders") and the Dissenting
Holders shall have the right for a period of thirty (30) days following such
delivery to convert their Preferred Shares pursuant to the terms hereof as they
existed prior to such alteration or change, or to continue to hold such
Preferred Shares. No such change shall be effective to the extent that, by its
terms, it applies to less than all of the Holders of Preferred Shares then
outstanding.
<PAGE> 21
IN WITNESS WHEREOF, the Corporation has executed this Certificate of
Designation as of the 28th day of January, 1999.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Anthony D. Antorino
___________________________________________
Anthony D. Autorino
Chairman and Chief Executive Officer
<PAGE> 22
EXHIBIT A
NOTICE OF CONVERSION
The undersigned hereby elects to convert shares of Series C Convertible
Preferred Stock (the "Preferred Stock"), represented by stock certificate No(s).
_________________(the "Preferred Stock Certificates"), into shares of common
stock ("Common Stock") of Shared Technologies Cellular, Inc. according to the
terms and conditions of the Certificate of Designation relating to the Preferred
Stock (the "Certificate of Designation"), as of the date written below.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Certificate of Designation.
Date of Conversion:_______________________________
Number of Shares of
Preferred Stock to be Converted:__________________
Amount of Accrued Premium: _______________________
Applicable Conversion Price:______________________
Number of Shares of
Common Stock to be Issued:________________________
Name of Holder:___________________________________
Address:__________________________________________
__________________________________________
__________________________________________
Signature:________________________________________
Name:
Title:
Holder Requests Delivery to be made: (check one)
By Delivery of Physical Certificates to the Above Address
Through Depository Trust Corporation
(Account _____________________________________________ )
<PAGE> 1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
January 28, 1999, by and between Shared Technologies Cellular, Inc., a Delaware
corporation (the "Company"), and each of the entities whose names appear on the
signature pages hereof. Such entities are each referred to herein as a
"Purchaser" and, collectively, as the "Purchasers".
The Company wishes to sell to each Purchaser, and each Purchaser
wishes to buy, on the terms and subject to the conditions set forth in this
Agreement, shares (the "Preferred Shares") of the Company's Series C Convertible
Preferred Stock, par value $.01 per share (the "Preferred Stock"), and related
Warrants in the form attached hereto as Exhibit A (the "Warrants"). The
Preferred Shares are convertible pursuant to the terms of the Certificate of
Designation relating to the Preferred Stock, the form of which is attached
hereto as Exhibit B (the "Certificate of Designation") into shares (the
"Conversion Shares") of the Company's common stock, par value .01 per share (the
"Common Stock"). The Warrants are exercisable into shares of Common Stock (the
"Warrant Shares") in accordance with their terms. The Preferred Shares, the
Conversion Shares, the Warrants and the Warrant Shares are collectively referred
to herein as the "Securities". Any capitalized term used herein that is not
otherwise defined shall have the meaning specified therefor in the Certificate
of Designation.
The sale of the Preferred Shares and the Warrants by the Company to
the Purchasers will be effected in reliance upon the exemption from securities
registration afforded by the provisions of Regulation D ("Regulation D"), as
promulgated by the Securities and Exchange Commission (the "Commission") under
the Securities Act. The Company has agreed to effect the registration of the
Conversion Shares and the Warrant Shares under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to a Registration Rights Agreement of
even date herewith by and between the Company and each of the Purchasers (the
"Registration Rights Agreement").
The Company and each Purchaser hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
1.1 Agreement to Purchase and Sell. Upon the terms and subject to the
satisfaction or waiver of the conditions set forth herein, the Company agrees to
sell and each Purchaser agrees to purchase the number of Preferred Shares and
Warrants set forth below such Purchaser's name on the signature pages hereof at
a purchase price for such Preferred Shares and Warrants equal to one thousand
dollars ($1,000) times the number of Preferred Shares purchased by such
Purchaser (the "Purchase Price").
1.2 Closing. The closing of the purchase and sale of the Preferred Shares
and Warrants hereunder (the "Closing") will occur upon the satisfaction (or
waiver) of the conditions set forth herein, the execution and delivery of this
Agreement and the other Transaction Documents (as defined below)
<PAGE> 2
by the Company and each Purchaser (which delivery may be effected by facsimile
transmission), and full payment of the Purchase Price by each Purchaser by wire
transfer of immediately available funds against physical delivery by the Company
of duly executed certificates representing the Preferred Shares and the Warrants
purchased by such Purchaser at the Closing. The date on which the Closing occurs
is hereinafter referred to as the "Closing Date".
1.3 Certain Definitions. When used herein, (A) "Business Day" shall mean
any day on which the New York Stock Exchange (the "NYSE") and commercial banks
in the city of New York are open for business, (B) an "affiliate" of a party
shall mean any person or entity controlling, controlled by or under common
control with that party and (C) "control" shall mean, with respect to an entity,
the ability to direct the business, operations or management of such entity,
whether through an equity interest therein or otherwise.
2. REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER.
Each Purchaser hereby represents and warrants to the Company and agrees
with the Company that, as of the date of this Agreement and as of the Closing
Date:
2.1 Authorization; Enforceability. Such Purchaser is duly and validly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization with full power and authority
to purchase the Preferred Shares and Warrants and to execute and deliver this
Agreement. This Agreement and the Registration Rights Agreement each constitutes
such Purchaser's valid and legally binding obligation, enforceable in accordance
with its terms.
2.2 Accredited Investor; Purchase as Principal. Such Purchaser is an
accredited investor as that term is defined in Rule 501 of Regulation D, and is
acquiring the Preferred Shares and Warrants solely for its own account as a
principal and not with a present view to the public resale or distribution of
all or any part thereof, except pursuant to sales that are exempt from the
registration requirements of the Securities Act and/or sales registered under
the Securities Act; provided, however that in making such representation, such
Purchaser does not agree to hold the Securities for any minimum or specific term
and reserves the right to sell, transfer or otherwise dispose of the Securities
at any time in accordance with the provisions of this Agreement and with Federal
and state securities laws applicable to such sale, transfer or disposition.
2.3 Information. The Company has provided such Purchaser with information
regarding the business, operations and financial condition of the Company, and
has granted to such Purchaser the opportunity to ask questions of and receive
answers from representatives of the Company, its officers, directors, employees
and agents concerning the Company and materials relating to the terms and
conditions of the purchase and sale of the Preferred Shares and Warrants
hereunder. Neither such information nor any other investigation conducted by
such Purchaser or any of its representatives shall modify, amend or otherwise
affect such Purchaser's right to rely on the Company's representations and
warranties contained in this Agreement.
2
<PAGE> 3
2.4 Limitations on Disposition. Such Purchaser acknowledges that, except
as provided in the Registration Rights Agreement, the Securities have not been
and are not being registered under the Securities Act and may not be transferred
or resold without registration under the Securities Act or unless pursuant to an
exemption therefrom.
2.5 Legend. Such Purchaser understands that the certificates representing
the Securities may bear at issuance a restrictive legend in substantially the
following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or the securities laws of any state, and may not
be offered or sold unless a registration statement under the
Securities Act and applicable state securities laws shall have
become effective with regard thereto, or an exemption from
registration under such laws is available in connection with such
offer or sale."
Notwithstanding the foregoing, it is agreed that, as long as (A) the
resale or transfer (including without limitation a pledge) of any of the
Securities is registered pursuant to an effective registration statement, (B)
such Securities have been publicly sold pursuant to Rule 144 ("Rule 144"), or
(C) such Securities can be publicly sold pursuant to Rule 144(k) under the
Securities Act, such Securities shall be issued without any legend or other
restrictive language and, with respect to Securities upon which such legend is
stamped, the Company shall issue new certificates without such legend to the
holder upon request.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to each Purchaser and agrees
with each Purchaser that, as of the date of this Agreement and as of the Closing
Date:
3.1 Organization, Good Standing and Qualification. Each of the Company and
its subsidiaries is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization and has all
requisite corporate power and authority to carry on its business as now
conducted. Each of the Company and its subsidiaries is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure so to qualify would have a material adverse effect on the consolidated
business or financial condition of the Company and its subsidiaries taken as a
whole.
3.2 Authorization; Consents. The Company has the requisite corporate power
and authority to enter into and perform its obligations under (i) this
Agreement, (ii) the Registration Rights Agreement and (iii) the Warrants and all
other agreements, documents, certificates or other instruments executed and
delivered by or on behalf of the Company at the Closing (the instruments
described in (i), (ii) and (iii) being collectively referred to herein as the
"Transaction Documents"), to execute, file and perform its obligations under the
Certificate of Designation, to issue and sell the Preferred Shares and the
Warrants to the Purchasers in accordance with the terms hereof, to issue the
Conversion Shares
3
<PAGE> 4
upon conversion of the Preferred Shares in accordance with the Certificate of
Designation, and to issue the Warrant Shares upon exercise of the Warrants in
accordance with the terms of the Warrants. Except as set forth on Schedule 3.2,
all corporate action on the part of the Company by its officers, directors and
stockholders necessary for (A) the authorization, execution and delivery of, and
the performance by the Company of its obligations under, the Transaction
Documents, and (B) the authorization, execution and filing of, and the
performance by the Company of its obligations under, the Certificate of
Designation has been taken, and no further consent or authorization of the
Company, its Board of Directors, its stockholders, any governmental agency or
organization (other than such approval as may be required under the Securities
Act and applicable state securities laws in respect of the Registration Rights
Agreement), or any other person or entity is required (pursuant to any rule of
the National Association of Securities Dealers, Inc. or otherwise).
3.3 Enforcement. The Transaction Documents constitute valid and legally
binding obligations of the Company, enforceable in accordance with their
respective terms.
3.4 Disclosure Documents; Agreements; Financial Statements; Other
Information. The Company has filed with the Commission: (i) the Company's Annual
Report on Form 10-K for the year ended December 31, 1997, (ii) Quarterly Reports
on Form 10-Q for the quarters ended March 31, 1998, June 30, 1998 and September
30, 1998, (iii) all Current Reports on Form 8-K, and any other reports, required
to be filed with the Commission since December 31, 1997 and prior to the date
hereof and (iv) the Company's definitive Proxy Statement for its 1998 Annual
Meeting of Stockholders (collectively, the "Disclosure Documents"). The Company
is not aware of any event occurring on or prior to the Closing (other than the
transactions effected hereby) that would require the filing of, or with respect
to which the Company intends to file, a Form 8-K after the Closing. Each
Disclosure Document, as of the date of the filing thereof with the Commission,
conformed in all material respects to the requirements of the Exchange Act, and
the rules and regulations thereunder and, as of the date of such filing, such
Disclosure Document did not contain an untrue statement of material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. All material agreements required to be filed as exhibits to the
Disclosure Documents have been filed as required. Neither the Company nor any of
its subsidiaries is in breach of any agreement to which it is a party or by
which it is bound where such breach is reasonably likely to have a material
adverse effect on (i) the consolidated business, operations, properties,
financial condition, prospects or results of operations of the Company and its
subsidiaries taken as a whole, (ii) the transactions contemplated hereby, by the
other Transaction Documents (as defined below) and by the Certificate of
Designation or (iii) the ability of the Company to perform its obligations under
this Agreement, under the other Transaction Documents and under the Certificate
of Designation (collectively, a "Material Adverse Effect"). Except as set forth
in the Disclosure Documents, the Company has no liabilities, contingent or
otherwise, other than liabilities incurred in the ordinary course of business
which, under generally accepted accounting principles, are not required to be
reflected in such financial statements and which, individually or in the
aggregate, are not material to the consolidated business or financial condition
of the Company and its subsidiaries taken as a whole. As of their respective
dates, the financial statements of the Company included in the Disclosure
Documents complied as to form in all material respects with applicable
accounting
4
<PAGE> 5
requirements and the published rules and regulations of the Commission with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied at the times and
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end adjustments). The written information
described on Schedule 2.3 does not contain an untrue or misleading statement of
material fact , and does not include any material, non-public information.
3.5 Capitalization. The capitalization of the Company, including its
authorized capital stock, the number of shares issued and outstanding, the
number of shares issuable and reserved for issuance pursuant to the Company's
stock option plans, the number of shares issuable and reserved for issuance
pursuant to securities (other than the Preferred Stock) exercisable for, or
convertible into or exchangeable for any shares of Common Stock and the number
of shares initially to be reserved for issuance upon conversion of the Preferred
Shares and exercise of the Warrants is set forth on Schedule 3.5 hereto. All of
such outstanding shares of capital stock have been, or upon issuance will be,
validly issued, fully paid and non-assessable. No shares of the capital stock of
the Company are subject to preemptive rights or any other similar rights of the
stockholders of the Company or any liens or encumbrances created by or through
the Company. Except as disclosed on Schedule 3.5, or as contemplated herein,
there are no outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable or exchangeable for, any shares of capital stock
of the Company or any of its subsidiaries, or arrangements by which the Company
or any of its subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its subsidiaries.
3.6 Valid Issuance. The Preferred Shares are duly authorized and, when
issued, sold and delivered in accordance with the terms hereof, (i) will be duly
and validly issued, fully paid and nonassessable, free and clear of any taxes,
liens, claims, preemptive or similar rights or encumbrances imposed by or
through the Company (collectively, "Encumbrances"), (ii) based in part upon the
representations of each Purchaser in this Agreement, will be issued, sold and
delivered in compliance with all applicable Federal and state securities laws
and (iii) will be entitled to all of the rights, preferences and privileges set
forth in the Certificate of Designation. The Warrants are duly authorized and,
when issued, sold and delivered in accordance with the terms hereof, (i) will be
duly and validly issued, fully paid and nonassessable, free and clear of any
Encumbrances and (ii) based in part upon the representations of each Purchaser
in this Agreement, will be issued, sold and delivered in compliance with all
applicable Federal and state securities laws. The Conversion Shares are duly
authorized and reserved for issuance and, when issued upon conversion of the
Preferred Shares in accordance with the terms of the Certificate of Designation,
will be duly and validly issued, fully paid and nonassessable, free and clear of
any Encumbrances. The Warrant Shares are duly authorized and, upon the issuance
thereof in accordance with the terms of the Warrant, will be duly and validly
issued, fully paid and nonassessable, free and clear of any Encumbrances. The
Company's Board of Directors (i) has
5
<PAGE> 6
unanimously determined that the issuance and sale of the Preferred Shares and
Warrants hereunder, and the consummation of the transactions contemplated
hereby, by the other Transaction Documents and by the Certificate of Designation
(including without limitation the issuance of the Conversion Shares upon
exercise of the Preferred Shares and the Warrant Shares upon exercise of the
Warrants), are in the best interests of the Company, (ii) has unanimously
approved the issuance of Conversion Shares upon exercise of the Preferred Shares
and Warrant Shares upon exercise of the Warrants in the aggregate in excess of
19.99% of the number of shares of Common Stock outstanding on the Closing Date,
and (iii) intends to recommend to the stockholders of the Company that they
approve the issuance of Conversion Shares and Warrant Shares in excess of such
number.
3.7 No Conflict with Other Instruments. Except as set forth on Schedule
3.7, neither the Company nor any of its subsidiaries is in violation of any
provisions of its charter, bylaws or any other governing document as amended and
in effect on and as of the date hereof or in default (and no event has occurred
which, with notice or lapse of time or both, would constitute a default) under
any provision of any instrument or contract to which it is a party or by which
it is bound, or of any provision of any Federal or state judgment, writ, decree,
order, statute, rule or governmental regulation applicable to the Company, which
would have a material adverse effect on the consolidated business or financial
condition of the Company and its subsidiaries taken as a whole. Except as set
forth on Schedule 3.7, the (i) execution, delivery and performance of this
Agreement and the other Transaction Documents, (ii) execution and filing of the
Certificate of Designation and (iii) consummation of the transactions
contemplated hereby and thereby (including without limitation, the issuance of
the Preferred Shares and the Warrants and the reservation for issuance and
issuance of the Conversion Shares and the Warrant Shares) will not, in any such
case, result in any such violation or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a default under any
such provision, instrument or contract or an event which results in the creation
of any lien, charge or encumbrance upon any assets of the Company or of any of
its subsidiaries or the triggering of any preemptive or anti-dilution rights or
rights of first refusal or first offer on the part of holders of the Company's
securities.
3.8 Financial Condition; Taxes; Litigation.
3.8.1 The Company's financial condition is, in all material
respects, as described in the Disclosure Documents, except for changes in the
ordinary course of business and normal year-end adjustments that are not, in the
aggregate, materially adverse to the consolidated business or financial
condition of the Company and its subsidiaries taken as a whole. Except as
otherwise described in the Disclosure Documents, there has been no material
adverse change to the Company's business, operations, properties, financial
condition, prospects or results of operations since the date of the Company's
most recent audited financial statements contained in the Disclosure Documents.
3.8.2 Neither the Company nor any of its subsidiaries is the subject
of any pending or, to the Company's knowledge, threatened inquiry, investigation
or administrative or legal proceeding by the Internal Revenue Service, the
taxing authorities of any state or local jurisdiction, the Commission or any
state securities commission or other governmental or regulatory entity which
could reasonably be expected to have a Material Adverse Effect.
6
<PAGE> 7
3.8.3 Except as described on Schedule 3.8.3, there is no material
claim, litigation or administrative proceeding pending, or, to the Company's
knowledge, threatened or contemplated, against the Company or any of its
subsidiaries, or against any officer, director or employee of the Company or any
such subsidiary in connection with such person's employment therewith. Neither
the Company nor any of its subsidiaries is a party to or subject to the
provisions of, any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality which could reasonably be expected to have
a Material Adverse Effect.
3.9 Reporting Company; Form S-3. The Company is subject to the reporting
requirements of the Exchange Act, has a class of securities registered under
Section 12 of the Exchange Act, and has filed all reports required thereby. The
Company is eligible to register for resale shares of its Common Stock on a
registration statement on Form S-3 under the Securities Act.
3.10 Acknowledgement of Dilution. The Company acknowledges that the
issuance of the Conversion Shares upon conversion of the Preferred Shares in
accordance with the terms of the Certificate of Designation and the issuance of
the Warrant Shares in accordance with the terms of the Warrants may result in
dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Company further acknowledges
that its obligation to issue Conversion Shares upon conversion of Preferred
Shares in accordance with the terms of the Certificate of Designation and to
issue Warrant Shares in accordance with the terms of the Warrants is
unconditional and absolute regardless of the effect of any such dilution.
3.11 Intellectual Property. The Company and its subsidiaries each has the
right to use adequate trademarks, trade names and other rights to inventions,
know-how, patents, copyrights, confidential information and other intellectual
property rights necessary to conduct the business now operated by it, and is not
aware of any infringement by a third party with respect to such rights or of any
infringement by it or conflict with asserted rights of others that, in any such
case, if determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on the
consolidated business or financial condition of the Company and its subsidiaries
taken as a whole.
3.12 Registration Rights; Rights of Participation. Except as described on
Schedule 3.12 hereto, (A) the Company has not granted or agreed to grant to any
person or entity any rights (including "piggy-back" registration rights) to have
any securities of the Company registered with the Commission or any other
governmental authority and (B) no person or entity, including, but not limited
to, current or former stockholders of the Company, underwriters, brokers, agents
or other third parties, has any right of first refusal, preemptive right, right
of participation, anti-dilutive right or any similar right to participate in the
transactions contemplated by this Agreement, the other Transaction Documents or
the Certificate of Designation which has not been waived or will not be waived
or otherwise satisfied as of the Closing.
3.13 Listing on Nasdaq. The Common Stock is authorized for quotation on
the Nasdaq
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SmallCap Market, and trading in the Common Stock on the Nasdaq SmallCap Market
has not been suspended. The Company is, to its knowledge, in full compliance
with the listing criteria of the Nasdaq SmallCap Market, and does not reasonably
anticipate that the Common Stock will lose its listing on the Nasdaq SmallCap
Market, whether by reason of the transactions contemplated by this Agreement,
the other Transaction Documents or the Certificate of Designation, or otherwise
and is not aware of any inquiry by or received any notice from the Nasdaq
regarding any failure or alleged failure by the Company to comply with such
criteria.
3.14 Solicitation; Other Issuances of Securities. Neither the Company nor
any of its subsidiaries or affiliates, nor any person acting on its or their
behalf, (i) has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the offer or
sale of the Preferred Shares or Warrants , (ii) has, directly or indirectly,
made any offers or sales of any security or solicited any offers to buy any
security, under any circumstances that would require registration of the
Preferred Shares or Warrants under the Securities Act or (iii) has issued any
shares of Common Stock or shares of any series of preferred stock or other
securities or instruments convertible into, exchangeable for or otherwise
entitling the holder thereof to acquire shares of Common Stock which would be
integrated with the sale of the Preferred Shares and Warrants to the Purchasers,
or the issuance of the Conversion Shares or Warrant Shares upon the conversion
or exercise thereof, for purposes of determining whether stockholder approval is
required under the listing criteria of the Nasdaq SmallCap Market.
3.15 Fees. Except as described on Schedule 3.15 hereto, the Company is not
obligated to pay any compensation or other fee, cost or related expenditure to
any underwriter, broker, agent or other representative in connection with the
transactions contemplated hereby.
3.16 Foreign Corrupt Practices. To the knowledge of the Company, neither
the Company, nor any of its subsidiaries nor any director, officer, agent,
employee or other person acting on behalf of the Company or any subsidiary, has
(i) used any corporate funds for any unlawful contribution, gift, entertainment
or other unlawful expenses relating to political activity, (ii) made any direct
or indirect unlawful payment to any foreign or domestic government official or
employee, (iii) violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback
or other unlawful payment to any foreign or domestic government official or
employee.
3.17 Title. Neither the Company nor any of its subsidiaries owns any real
property; each of the Company and its subsidiaries has good and marketable title
to all personal property owned by them which is material to the business of the
Company and its subsidiaries, in each case free and clear of all liens,
encumbrances and defects, except for liens, claims or encumbrances that do not
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries. Any real property and facilities held under lease
by the Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries.
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3.18 Regulatory Permits. The Company and its subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, except where the failure to so possess such certificates,
authorizations or permits would not have a Material Adverse Effect, and neither
the Company nor any such subsidiary has received any notice of proceedings
relating to the revocation or modification of any such certificate,
authorization or permit.
3.19 Key Employees. Each person whose name is set forth on Schedule 3.19
(each, a "Key Employee") is currently serving in the capacity indicated on such
schedule on a full-time basis. The Company is not aware of any fact or
circumstance (including without limitation the terms of any agreement to which
such person is a party or any litigation in which such person is or may become
involved) that would limit or prevent any such person from serving in such
capacity on a full-time basis in the foreseeable future, or of any intention on
the part of any such person to limit or terminate his or her employment with the
Company.
3.20 MCI Joint Venture. The Company is not aware of any fact, circumstance
or event that, with the passage of time or otherwise, could result in the
expiration or termination of the letter of intent, dated as of January 7, 1999,
between the Company and MCI WorldCom, Inc. (the "MCI Letter Agreement"), prior
to the execution of definitive documentation relating to the proposed joint
venture described in the MCI Letter of Intent.
4. COVENANTS OF THE COMPANY.
4.1 Corporate Existence. The Company shall, so long as any Purchaser or
any affiliate of such Purchaser beneficially owns any Securities, maintain its
corporate existence in good standing and shall pay all taxes owed by it when due
except for taxes which the Company reasonably disputes.
4.2 Provision of Information. The Company shall, so long as such Purchaser
or any affiliate of such Purchaser beneficially owns any Securities, provide
each Purchaser with copies of its annual reports on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K and proxy statements and other
materials sent to stockholders, in each such case promptly after the filing
thereof with the Commission.
4.3 Form D; Blue-Sky Qualification. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Purchaser promptly after such filing. The Company shall, on
or before the Closing Date (or, if permitted under applicable law or regulation,
at such time following the Closing Date as required by such law or regulation),
take such action as is necessary to qualify the Preferred Shares and Warrants
for sale under applicable state or "blue-sky" laws or obtain an exemption
therefrom, and shall provide evidence of any such action to each Purchaser at or
prior to the Closing.
4.4 Reporting Status. As long as any Purchaser or any affiliate of such
Purchaser
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beneficially owns any Securities and until the date on which any of the
foregoing may be sold to the public pursuant to Rule 144(k) (or any successor
rule or regulation), (i) the Company shall timely file with the Commission all
reports required to be so filed pursuant to the Exchange Act and (ii) the
Company shall not terminate its status as an issuer required by the Exchange Act
to file reports thereunder even if the Exchange Act or the rules or regulations
thereunder would permit such termination. The Company agrees to file with the
Commission a Form 8-K describing the terms of the transactions contemplated by
this Agreement and the other Transaction Documents, with this Agreement and all
exhibits attached to such Form 8-K as an exhibit thereto, on or before the fifth
(5th) Business Day following the Closing Date in the form required by the
Exchange Act.
4.5 Reservation of Common Stock. The Company shall at all times have
authorized and reserved for issuance, free from any preemptive rights, solely
for the purpose of effecting conversions of the Preferred Shares and exercise of
the Warrants, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all of the Preferred Shares and
exercise of all of the Warrants (the "Reserved Amount"). As of the Closing Date,
the Reserved Amount shall be equal to no less than 5,175,000 (subject to
equitable adjustment for each of the events specified in Section 6 of the
Certificate of Designation) shares of Common Stock. The Reserved Amount as of
the Closing Date shall be allocated to each Purchaser in the same proportion as
the number of Preferred Shares purchased by such Purchaser hereunder bears to
the aggregate number of Preferred Shares purchased by all of the Purchasers
hereunder; and any increase to the Reserved Amount shall be allocated to each
Purchaser in the same proportion as the number of Conversion Shares and Warrant
Shares issuable to such Purchaser upon conversion of the Preferred Shares and
exercise of the Warrants held by such Purchaser at the time of such increase
(assuming for such purpose that such conversion or exercise were to occur as of
the time of such increase and without regard to any restriction or limitation on
such conversion or exercise) bears to the aggregate number of Conversion Shares
and Warrant Shares issuable to all of the Purchasers upon conversion of the
Preferred Shares and exercise of the Warrants held by such Purchasers at the
time of such increase (assuming for such purpose that such conversion or
exercise were to occur as of the time of such increase and without regard to any
restriction or limitation on such conversion or exercise). The Company shall not
reduce the number of shares reserved for issuance hereunder without the written
consent of each of the holders Preferred Shares then outstanding.
4.6 Use of Proceeds. The Company shall use the proceeds from the sale of
the Preferred Shares for general corporate purposes only (it being understood
that acquisitions by the Company of other entities shall be considered within
the meaning of "general corporate purposes"), in the ordinary course of its
business and consistent with past practice, and shall not use such proceeds to
make a loan to any employee, officer or director of the Company or to repurchase
or pay a dividend on shares of Common Stock.
4.7 Quotation on Nasdaq. The Company shall (i) promptly following the
Closing, take such action as may be necessary to include all of the Conversion
Shares and the Warrant Shares that may be issued by the Company on the Nasdaq
SmallCap Market, and (ii) use its reasonable commercial efforts to maintain the
designation and quotation, or listing, of the Common Stock on the
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Nasdaq SmallCap Market, the Nasdaq National Market or the NYSE for a minimum of
five (5) years following the Closing.
4.8 Use of Purchaser Name. Except as may be required by applicable law,
the Company shall not use, directly or indirectly, any Purchaser's name or the
name of any of its affiliates in any advertisement, announcement, press release
or other similar communication unless it has received the prior written consent
of any Purchaser for the specific use contemplated (which consent will not be
unreasonably withheld) or as otherwise required by applicable law or regulation.
4.9 Company's Instructions to Transfer Agent. On or prior to the Closing
Date, the Company shall execute and deliver irrevocable instructions to its
transfer agent (the "Transfer Agent") (i) to issue certificates representing
Conversion Shares upon conversion of the Preferred Shares in accordance with the
terms of the Certificate of Designation and receipt of (i) a valid Conversion
Notice (as defined in the Certificate of Designation) from a Purchaser and (ii)
a confirmation from the Company, in the amount specified in such Conversion
Notice, in the name of such Purchaser or its nominee (subject to the Company's
right pursuant to the terms of the Certificate of Designation to pay cash in
lieu of issuing such certificates upon a conversion), (ii) to issue certificates
representing the Warrant Shares upon the exercise thereof in accordance with the
terms of the Warrant and receipt of a confirmation from the Company, and (iii)
to deliver such certificates to such Purchaser no later than the close of
business on the later to occur of (A) the third (3rd) Business Day following the
related Conversion Date (as defined in the Certificate of Designation) or
Exercise Date (as defined in the Warrant, and (B) the first Business Day
following the date of delivery of the original certificates, duly endorsed,
representing the Preferred Shares or Warrants (together in the case of the
Warrants with the Exercise Price (as defined in the Warrants)) being converted
or exercised, as the case may be. The Company shall instruct the transfer agent
that, in lieu of delivering physical certificates representing shares of Common
Stock to a Purchaser upon conversion of the Preferred Shares, or issuance of the
Warrant Shares, and as long as the Transfer Agent is a participant in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program, and
such Purchaser has not informed the Company that it wishes to receive physical
certificates therefor, the transfer agent may effect delivery of Conversion
Shares or Warrant Shares, as the case may be, by crediting the account of such
Purchaser or its nominee at DTC for the number of shares for which delivery is
required hereunder within the time frame specified above for delivery of
certificates. The Company represents to and agrees with each Purchaser that it
will not give any instruction to the Transfer Agent that will conflict with the
foregoing instruction or otherwise restrict such Purchaser's right to convert
the Preferred Shares or exercise the Warrants or to receive Conversion Shares or
Warrant Shares in accordance with the terms of the Certificate of Designation or
the Warrants, as the case may be. In the event that the Company's relationship
with the Transfer Agent should be terminated for any reason, the Company will
use reasonable commercial efforts to ensure that the Transfer Agent shall
continue acting as transfer agent pursuant to the terms hereof until such time
that a successor transfer agent is appointed by the Company and receives the
instructions described above.
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4.10 Issuance of Equity Securities; Preemption Right.
4.10.1 Except as set forth on Schedule 4.10.1, the Company
agrees that it will not, during the one year period
following the Closing Date (the "Limitation Period"),
issue any Common Stock or any other equity security of
the Company, or any security convertible into, or
exercisable or exchangeable for, Common Stock or any
such equity security (collectively, an "Equity
Security"), unless it delivers written notice thereof (a
"Notice of Issuance") to each Purchaser at least ten
(10) Business Days prior to the effective date of such
issuance. Each Notice of Issuance shall set forth the
terms and conditions of the proposed issuance, including
without limitation a description of the Equity
Securities being issued, the amount thereof, the
purchase price therefor and the proposed closing date
for such issuance (the "Equity Security Closing Date").
Following delivery of a Notice of Issuance to a
Purchaser, the Company agrees that it will not issue any
Equity Securities specified therein during the
Limitation Period except on the terms set forth in such
notice.
4.10.2 Each Purchaser shall have the right (a "Preemption
Right") following receipt of a Notice of Issuance to, at
its option, either (A) purchase up to its Pro Rata Share
(as defined below) of the amount of Equity Securities
set forth in such Notice of Issuance (less any Equity
Securities that are purchased by the holders of the
Company's Convertible Notes issued in May 1998 (the
"Preemptive Right Holders") on the terms and for the
consideration described therein (a "Preemptive
Purchase") or (B) exchange all or any part of the
Preferred Shares then held by it for such Equity
Securities on the terms set forth in such Notice of
Issuance (a "Preemptive Exchange"). In the case of a
Preemptive Exchange, the Company shall issue Equity
Securities in an amount equal to the Stated Value of the
Preferred Shares being exchanged plus the Premium (as
defined in the Certificate of Designation) accrued
thereon (without regard to the amount of Equity
Securities set forth in such Notice of Issuance), and
delivery of such Preferred Shares shall be deemed to
constitute payment of the consideration specified in
such Notice of Issuance. A Purchaser may exercise its
Preemption Right by delivering written notice of such
exercise to the Company (a "Preemption Notice") on or
before the fifth (5th) Business Day following such
Purchaser's receipt of such Notice of Issuance. Each
Preemption Notice will specify whether the Purchaser
delivering such notice intends to effect a Preemptive
Purchase or a Preemptive Exchange, and the amount of
Equity Securities that such Purchaser intends to acquire
thereby.
4.10.3 In the case of a Preemptive Purchase, the Company may
issue Equity Securities to a third party only if and to
the extent that the amount of Equity Securities set
forth in the related Notice of Issuance exceeds the
aggregate amount of (i) Equity Securities that are
purchased by the Purchasers hereunder plus (ii) Equity
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Securities that are purchased by the Preemptive Right
Holders; in the case of a Preemptive Exchange, the
Company may issue Equity Securities to a third party up
to the full amount of Equity Securities set forth in the
related Notice of Issuance (less any Equity Securities
that are purchased by a Purchaser under this Section
4.10) as long as the Company issues to each Purchaser
requesting such exchange, upon receipt of the Preferred
Shares being exchanged, Equity Securities in the amount
specified in such Purchaser's Preemption Notice. Upon
receipt of an Preemption Notice from a Purchaser, the
Company will, no later than the Business Day following
the date of such receipt, deliver to such Purchaser
copies of any and all written documentation (including
any terms sheets, letters of intent or agreements
between or among the Company and prospective purchasers
or other transferees of the Equity Securities) relating
to such issuance that then or thereafter exists. In the
event that the documentation relating to such issuance
contains terms that, in the reasonable judgment of any
Purchaser which has delivered a Preemption Notice
hereunder, are materially different from the terms set
forth in the related Notice of Issuance, such Purchaser
may rescind such Preemption Notice at any time prior to
the closing of such issuance.
This paragraph 4.10 will not apply, in addition to the issuances set forth on
Schedule 4.10.1, to (x) any underwritten offering of securities made pursuant to
a written underwriting agreement with a nationally-recognized investment bank,
(y) any issuance of securities made pursuant to a restricted stock or stock
option plan duly adopted by the Company or (z) any issuance of securities made
in connection with a strategic investment by an entity engaged in the same or
similar business as the Company, where the primary purpose of such issuance is
not to raise equity capital. A Purchaser's "Pro Rata Share" at any time shall
mean a fraction, the numerator of which is the number of Preferred Shares held
by such Purchaser at such time and the denominator is the number of Preferred
Shares held by all of the Purchasers at such time; provided, however, that if a
Purchaser declines to purchase any or the full amount of its Pro Rata Share of
Equity Securities being offered, the amount of such Pro Rata Share which such
Purchaser does not purchase shall be allocated among the Pro Rata Shares of the
remaining Purchasers on a pro rata basis calculated according to the number of
Preferred Shares then held by each such Purchaser.
4.11 Stockholder Approval. The Company agrees that it will (i) file with
the Commission, no later than the April 15th, 1999, proxy solicitation materials
("Proxy Materials") seeking the approval of the holders of a majority of the
Company's Common Stock for issuances of Conversion Shares and Warrant Shares in
excess of the Cap Amount (as defined in the Certificate of
Designation)("Stockholder Approval"), (ii) call and hold a meeting of its
stockholders for the purpose of voting on the proposals set forth in the Proxy
Materials on or before the one hundred and twenty fifth (125th) day following
the Closing Date and (iii) recommend approval of such proposals to its
stockholders at such meeting.
4.12 No Adverse Action. The Company and its subsidiaries shall refrain,
while any Preferred
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Shares are outstanding, from taking any action or entering into any arrangement
which in any way adversely affects (i) the rights, privileges or benefits
available to a holder of Preferred Stock pursuant to the terms of the
Certificate of Designation or (ii) the rights, privileges or benefits available
to a holder of a Warrant.
5. CONDITIONS TO CLOSING.
5.1 Conditions to Purchasers' Obligations at Closing. Each Purchaser's
obligations at the Closing, including without limitation its obligation to
purchase Preferred Shares and Warrants at the Closing, are conditioned upon the
satisfaction by the Company (or waiver by such Purchaser) of each of the
following events as of the Closing Date:
5.1.1 the representations and warranties of the Company set
forth in this Agreement shall be true and correct in all
material respects as of such date as if made on such
date;
5.1.2 the Company shall have complied with or performed in all
material respects all of the agreements, obligations and
conditions set forth in this Agreement that are required
to be complied with or performed by the Company on or
before the Closing, and the Closing Date shall be a date
that is not later than February 5, 1999;
5.1.3 the Company shall have delivered to such Purchaser a
certificate, signed by an officer of the Company,
certifying that the conditions specified in this
paragraph 5.1 have been fulfilled as of the Closing;
5.1.4 the Company shall have filed the Certificate of
Designation with the Secretary of State of the State of
Delaware and shall have furnished such Purchaser with
reasonable evidence of such filing;
5.1.5 the Company shall have delivered to such Purchaser an
opinion of counsel for the Company, dated as of such
date, in substantially the form set forth on Exhibit
5.1.5 hereto, and covering such additional matters as
may reasonably be requested by such Purchaser;
5.1.6 the Company shall have delivered to such Holder duly
executed certificates representing the Preferred Shares
and Warrants being so purchased;
5.1.7 the Company shall have executed and delivered the
Registration Rights Agreement;
5.1.8 the Common Stock shall be designated for quotation on
the Nasdaq
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SmallCap Market and no suspension of trading in the
Common Stock on such market shall have occurred and be
continuing as of the Closing Date;
5.1.9 the Company shall have authorized and reserved for
issuance the number of shares of Common Stock required
to be reserved under paragraph 4.5 hereof;
5.1.10 (i) each of the Company's executive officers and
directors who holds, beneficially owns or has voting
power with respect to at least 1000 shares of Common
Stock outstanding as of the Closing Date shall have
executed and delivered a letter agreement addressed to
such Purchaser in which such officer irrevocably agrees
to vote all of the shares of Common Stock beneficially
owned by such person and outstanding as of the record
date for any meeting of the Company's stockholders at
which Stockholder Approval is sought (or as of the date
of any written consent of stockholders) in favor of the
proposals set forth in the Proxy Materials and (ii) each
of Anthony Autorino and Vincent DiVincenzo shall have
executed and delivered a letter agreement addressed to
such Purchaser in which such person irrevocably agrees
to refrain from selling any shares of Common Stock
beneficially owned by such person (other than shares of
Common Stock that may be deemed to be beneficially owned
by such person as a result of such individual's
ownership of warrants issued by Share Technologies
Fairchild, Inc. entitling the holder to purchase shares
of Common Stock ) until the Registration Statement (as
defined in the Registration Rights Agreement) is
declared effective and Stockholder Approval has been
obtained
5.1.11 the MCI Letter of Intent shall not have expired or
terminated prior to the execution of definitive
documentation relating to the proposed joint venture
described in the MCI Letter of Intent;
5.1.12 the Company shall have delivered to each Purchaser final
drafts of each Schedule to this Agreement no later than
the close of business on the Business Day immediately
prior to the Closing Date;
5.1.13 the Transfer Agent shall have agreed in writing to
comply with the instructions described in paragraph 4.9
hereof and the Company shall have notified such
Purchaser in writing of the name, address, and telephone
and fax number of, and the name of a contact person at,
the Transfer Agent for the purpose of delivering
Conversion Notices (as defined in the Certificate of
Designation); and
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5.1.14 the aggregate Stated Value of the Preferred Shares to be
purchased by the Purchasers hereunder shall not be less
than $15,000,000.
5.2 Conditions to Company's Obligations at the Closing. The Company's
obligations at the Closing are conditioned upon the satisfaction (or waiver by
the Company) of each of the following events as of the Closing Date:
5.2.1 the representations and warranties of each Purchaser
shall be true and correct in all material respects as of
such date as if made on such date; and
5.2.2 each Purchaser shall have complied with or performed all
of the agreements, obligations and conditions set forth
in this Agreement that are required to be complied with
or performed by the Purchaser on or before the Closing.
6. MISCELLANEOUS.
6.1 Survival. The representations and warranties made by the parties
herein shall survive the Closing for a period of two years notwithstanding any
due diligence investigation made by or on behalf of the party seeking to rely
thereon. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that in such case the parties shall negotiate in good faith
to replace such provision with a new provision which is not illegal,
unenforceable or void, as long as such new provision does not materially change
the economic benefits of this Agreement to the parties.
6.2 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and permitted assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement. The Purchaser may assign its
rights and obligations hereunder, in connection with any private sale or
transfer of the Preferred Shares in accordance with the terms hereof, as long
as, as a condition precedent to such transfer, the transferee executes an
acknowledgment agreeing to be bound by the applicable provisions of this
Agreement, in which case the term "Purchaser" shall be deemed to refer to such
transferee as though such transferee were an original signatory hereto. The
Company may not assign it rights or obligations under this Agreement except
that, in connection with a Change of Control Transaction (as defined below)
where the Company is not the surviving entity, the Company may assign its rights
or obligations hereunder to the surviving entity. For purposes hereof, "Change
of
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Control Transaction" shall mean the sale, conveyance or disposition of all or
substantially all of the assets of the Company or any of its subsidiaries
(including without limitation the sale or other conveyance of any common stock
or other equity securities of any of the Company's subsidiaries), or the
effectuation of a transaction or series of related transactions, in which more
than 50% of the voting power of the Company is disposed of, or the
consolidation, merger or other business combination of the Company or any of its
subsidiaries with or into any other entity, immediately following which the
prior stockholders of the Company fail to own, directly or indirectly, at least
fifty percent (50%) of the surviving entity.
6.3 No Reliance. Each party acknowledges that (i) it has such
knowledge in business and financial matters as to be fully capable of evaluating
this Agreement, the other Transaction Documents and the transactions
contemplated hereby and thereby, (ii) it is not relying on any advice or
representation of the other party in connection with entering into this
Agreement, the other Transaction Documents or such transactions (other than the
representations made in this Agreement or the other Transaction Documents),
(iii) it has not received from such party any assurance or guarantee as to the
merits (whether legal, regulatory, tax, financial or otherwise) of entering into
this Agreement or the other Transaction Documents or the performance of its
obligations hereunder and thereunder, and (iv) it has consulted with its own
legal, regulatory, tax, business, investment, financial and accounting advisors
to the extent that it has deemed necessary, and has entered into this Agreement
and the other Transaction Documents based on its own independent judgment and on
the advice of its advisors as it has deemed necessary, and not on any view
(whether written or oral) expressed by such party.
6.4 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder are several and not joint with the
obligations of the other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at the Closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
6.5 Injunctive Relief. The Company acknowledges that a breach by it
of its obligations hereunder will cause irreparable harm to the Purchaser and
that the remedy or remedies at law for any such breach will be inadequate and
agrees, in the event of any such breach, in addition to all other available
remedies, to an injunction restraining any breach and requiring immediate and
specific performance of such obligations without the necessity of showing
economic loss.
6.6 Governing Law; Jurisdiction. This Agreement shall be governed by
and construed under the laws of the State of New York without regard to the
conflict of laws provisions
17
<PAGE> 18
thereof. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof (certified or registered mail, return receipt requested)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law.
6.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
6.8 Headings. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
6.9 Notices. Any notice, demand or request required or permitted to
be given by any party to any other party pursuant to the terms of this Agreement
shall be in writing and shall be deemed given (i) when delivered personally or
by verifiable facsimile transmission (with an original to follow) on or before
5:00 p.m., eastern time, on a Business Day or, if such day is not a Business
Day, on the next succeeding Business Day, (ii) on the next Business Day after
timely delivery to a nationally-recognized overnight courier and (iii) on the
Business Day actually received if deposited in the U.S. mail (certified or
registered mail, return receipt requested, postage prepaid), addressed to the
parties as follows:
If to the Company:
Shared Technologies Cellular, Inc.
100 Great Meadow Road
Suite 100
Wethersfield, CT 06109
Attn: Legal Department
Tel: (860) 258-2500
Fax: (860) 258-2455
with a copy to:
Day, Berry & Howard LLP
260 Franklin Street
Boston MA 02110
Attn: Jeffrey A. Clopeck, Esq.
Tel: (617) 345-4600
Fax: (617) 345-4745
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<PAGE> 19
and if to any Purchaser, to such address for such Purchaser as shall appear on
the signature page hereof executed by such Purchaser, or as shall be designated
by such Purchaser in writing to the Company.
6.10 Expenses. The Company and each Purchaser each shall pay all
costs and expenses that it incurs in connection with the negotiation, execution,
delivery and performance of this Agreement.
6.11 Entire Agreement; Amendments; Waiver. This Agreement and the
other Transaction Documents constitute the entire agreement between the parties
with regard to the subject matter hereof and thereof, superseding all prior
agreements or understandings, whether written or oral, between or among the
parties. Except as expressly provided herein, neither this Agreement nor any
term hereof may be amended except pursuant to a written instrument executed by
the Company and the holders of at least two-thirds (2/3) of the Preferred Shares
then outstanding, and no provision hereof may be waived other than by a written
instrument signed by the party against whom enforcement of any such waiver is
sought.
[Remainder of Page Intentionally Left Blank]
19
<PAGE> 20
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: CFO
PURCHASER NAME: MARSHALL CAPITAL MANAGEMENT, INC.
By: /s/ Allan Weine
Name: Allan Weine
Title: President
ADDRESS:
11 Madison Ave., 3rd Floor
New York, NY 10010
Tel: 312-750-3239
Fax: 312-750-1031
Number of shares of Series C Preferred C Preferred Stock to be purchased: 5,000
Number of Warrants to be purchased equals the Stated Value of the Series C
Preferred Stock to be purchased times 0.02
/ / Check here if Purchaser elects not to be bound by the 4.99% limitation on
conversions set forth in paragraph 5(c) of the Certificate of Designation.
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<PAGE> 21
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: CFO
PURCHASER NAME: MARCUARD COOK & CIE S.A.
By: /s/ Mark Cook /s/ Jean-Luc Girod
Name: Mark Cook Jean-Luc Girod
Title: Manager Manager
ADDRESS:
7 Rue des Alpes
1211 Geneva 1
Tel: 41 22 716 3636
Fax: 41 22 716 3619
Number of shares of Series C Preferred C Preferred Stock to be purchased: 1,700
Number of Warrants to be purchased equals the Stated Value of the Series C
Preferred Stock to be purchased times 0.02
/ / Check here if Purchaser elects not to be bound by the 4.99% limitation on
conversions set forth in paragraph 5(c) of the Certificate of Designation.
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<PAGE> 22
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: CFO
PURCHASER NAME: EAGLE & DOMINION EURO AMERICAN GROWTH FUND LTD.
By: /s/ Duncan Byatt
Name: Duncan Byatt
Title: Director
ADDRESS:
c/o Eagle & American Asset Management Ltd.
33 Throgmorton Street
London EC2N 2BR
Tel: 0171-861-9560
Fax: 0171-861-9593
Number of shares of Series C Preferred C Preferred Stock to be purchased: 220
Number of Warrants to be purchased equals the Stated Value of the Series C
Preferred Stock to be purchased times 0.02
/ / Check here if Purchaser elects not to be bound by the 4.99% limitation on
conversions set forth in paragraph 5(c) of the Certificate of Designation.
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<PAGE> 23
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: CFO
PURCHASER NAME: EAGLE & DOMINION EURO AMERICAN GROWTH FUND L.P.
By: /s/ Duncan Byatt
Name: Duncan Byatt
Title: Director of General Partner
ADDRESS:
c/o Eagle & Dominion Asset Management Ltd.
33 Throgmorton Street
London EC2N 2BR
Tel: 0171-861-9560
Fax: 0171-861-9563
Number of shares of Series C Preferred C Preferred Stock to be purchased: 60
Number of Warrants to be purchased equals the Stated Value of the Series C
Preferred Stock to be purchased times 0.02
/ / Check here if Purchaser elects not to be bound by the 4.99% limitation on
conversions set forth in paragraph 5(c) of the Certificate of Designation.
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<PAGE> 24
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: CFO
PURCHASER NAME: MEINL BANK
By: /s/ Robert Kofler By: /s/ Claudia Wegscheidler
Name: Robert Kofler Name: Claudia Wegscheidler
Title: Member of the Title: Deputy Manager
Managing Board
ADDRESS:
Bauernmarkt 2
A-1014 Vienna
Tel: ++ 431-531 88 ext. 261
Fax: ++ 431-531 88 ext. 46
Number of shares of Series C Preferred C Preferred Stock to be purchased: 1,050
Number of Warrants to be purchased equals the Stated Value of the Series C
Preferred Stock to be purchased times 0.02
/ / Check here if Purchaser elects not to be bound by the 4.99% limitation on
conversions set forth in paragraph 5(c) of the Certificate of Designation.
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<PAGE> 25
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: CFO
PURCHASER NAME: TROWER FT
By: /s/ A. Trower
Name: A. Trower
Title: Fund Manager
ADDRESS:
33 Throsmorton St.
London
Tel: 0171 861 4561
Fax: 0171 861 4563
Number of shares of Series C Preferred C Preferred Stock to be purchased: 50
Number of Warrants to be purchased equals the Stated Value of the Series C
Preferred Stock to be purchased times 0.02
/ / Check here if Purchaser elects not to be bound by the 4.99% limitation on
conversions set forth in paragraph 5(c) of the Certificate of Designation.
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<PAGE> 26
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: CFO
PURCHASER NAME: AAGC ABN AMRO BANK NV
By: /s/ R.F. Bastiaenon
Name: R.F. Bastiaenon
Title: Head Trading
Private Banking
ADDRESS:
c/o Suisse American Securities, Inc.
12 East 49th Street, New York, NY 10017
Tel: ____________________
Fax: ____________________
Number of shares of Series C Preferred C Preferred Stock to be purchased: 1,000
Number of Warrants to be purchased equals the Stated Value of the Series C
Preferred Stock to be purchased times 0.02
/ / Check here if Purchaser elects not to be bound by the 4.99% limitation on
conversions set forth in paragraph 5(c) of the Certificate of Designation.
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<PAGE> 27
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: CFO
PURCHASER NAME: LUPTON ESTATES LTD.
By: /s/ C. Edmunds Allen
Name: C. Edmunds Allen
Title: Director
ADDRESS:
3rd Floor, Celtic House
Victoria Street, Douglas, Isle of Man
Tel: 01624 624 298
Fax: 01624 626 719
Number of shares of Series C Preferred C Preferred Stock to be purchased: 800
Number of Warrants to be purchased equals the Stated Value of the Series C
Preferred Stock to be purchased times 0.02
/ / Check here if Purchaser elects not to be bound by the 4.99% limitation on
conversions set forth in paragraph 5(c) of the Certificate of Designation.
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<PAGE> 28
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: CFO
PURCHASER NAME: DULVILLE LIMITED
By: /s/ Luisa Raez
Name: Luisa Raez
Title: Sole Director
ADDRESS:
9 Avenue d'Ostende
MC-98000 Monaco
Tel: 377-979711 70
Fax: 377-979711 71
Number of shares of Series C Preferred C Preferred Stock to be purchased: 800
Number of Warrants to be purchased equals the Stated Value of the Series C
Preferred Stock to be purchased times 0.02
/ / Check here if Purchaser elects not to be bound by the 4.99% limitation on
conversions set forth in paragraph 5(c) of the Certificate of Designation.
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<PAGE> 29
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: CFO
PURCHASER NAME: GRANGE NOMINEES LIMITED
By: /s/ Janet Laine
Name: Janet Laine
Title: Authorized Signatory
ADDRESS:
P.O. Box 118, Commerce House
Les Banques, St. Peter Port,
Guernsey GY1 3EZ
Tel: 44-1481-726014
Fax: 44-1481-716394
Number of shares of Series C Preferred C Preferred Stock to be purchased: 420
Number of Warrants to be purchased equals the Stated Value of the Series C
Preferred Stock to be purchased times 0.02
/ / Check here if Purchaser elects not to be bound by the 4.99% limitation on
conversions set forth in paragraph 5(c) of the Certificate of Designation.
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<PAGE> 30
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: CFO
PURCHASER NAME: NCL INVESTMENTS LTD A/C NCL (NOMINEES) LTD
By: /s/ D.H. Hunter
Name: D.H. Hunter
Title: Director
ADDRESS:
Bartlett House
9-12 Basinghall Street, London EC2V SNS
Tel: 0171 600 2801
Fax: 0171 726 6201
Number of shares of Series C Preferred C Preferred Stock to be purchased: 400
Number of Warrants to be purchased equals the Stated Value of the Series C
Preferred Stock to be purchased times 0.02
/ / Check here if Purchaser elects not to be bound by the 4.99% limitation on
conversions set forth in paragraph 5(c) of the Certificate of Designation.
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<PAGE> 31
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: CFO
PURCHASER NAME: THORNHILL INVESTMENT MANAGEMENT LIMITED ACCOUNT C
By: /s/ Christopher Chamberlain
Name: Christopher Chamberlain
Title: Director
ADDRESS:
77 South Audley Street
London W1Y 6DX
Tel: 0171 629 0662
Fax: 0171 629 7332
Number of shares of Series C Preferred C Preferred Stock to be purchased: 183
Number of Warrants to be purchased equals the Stated Value of the Series C
Preferred Stock to be purchased times 0.02
/ / Check here if Purchaser elects not to be bound by the 4.99% limitation on
conversions set forth in paragraph 5(c) of the Certificate of Designation.
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<PAGE> 32
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: CFO
PURCHASER NAME: THORNHILL INVESTMENT MANAGEMENT LIMITED ACCOUNT B
By: /s/ Christopher Chamberlain
Name: Christopher Chamberlain
Title: Director
ADDRESS:
77 South Audley Street
London W1Y 6DX
Tel: 0171 629 0662
Fax: 0171 629 7332
Number of shares of Series C Preferred C Preferred Stock to be purchased: 17
Number of Warrants to be purchased equals the Stated Value of the Series C
Preferred Stock to be purchased times 0.02
/ / Check here if Purchaser elects not to be bound by the 4.99% limitation on
conversions set forth in paragraph 5(c) of the Certificate of Designation.
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<PAGE> 33
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: CFO
PURCHASER NAME: OAKES FITZWILLIAMS & CO. S.A.
By: /s/ Herbert Oakes
Name: Herbert Oakes
Title:
ADDRESS:
7-9 St. James's Street
London SWIA IEE
Tel: 0171 925 1125
Fax: 0171 925 1026
Number of shares of Series C Preferred C Preferred Stock to be purchased: 341
Number of Warrants to be purchased equals the Stated Value of the Series C
Preferred Stock to be purchased times 0.02
/ / Check here if Purchaser elects not to be bound by the 4.99% limitation on
conversions set forth in paragraph 5(c) of the Certificate of Designation.
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<PAGE> 34
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: CFO
PURCHASER NAME: OAKES FITZWILLIAMS & CO. LIMITED
By: /s/ Herbert Oakes
Name: Herbert Oakes
Title: Director
ADDRESS:
7-9 St. James's Street
London SWIA IEE
Tel: 0171 925 1125
Fax: 0171 925 1026
Number of shares of Series C Preferred C Preferred Stock to be purchased: 150
Number of Warrants to be purchased equals the Stated Value of the Series C
Preferred Stock to be purchased times 0.02
/ / Check here if Purchaser elects not to be bound by the 4.99% limitation on
conversions set forth in paragraph 5(c) of the Certificate of Designation.
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<PAGE> 35
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: CFO
PURCHASER NAME: THE TRIDENT NORTH ATLANTIC FUND
By: /s/ Christopher Mills
Name: Christopher Mills
Title: Director
ADDRESS:
P.O. Box 309
Ugland House, George Town, Grand Cayman
Tel: 00 1345 949 0050
Fax: 00 1345 949 8062
Number of shares of Series C Preferred C Preferred Stock to be purchased: 70
Number of Warrants to be purchased equals the Stated Value of the Series C
Preferred Stock to be purchased times 0.02
/ / Check here if Purchaser elects not to be bound by the 4.99% limitation on
conversions set forth in paragraph 5(c) of the Certificate of Designation.
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<PAGE> 36
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: CFO
PURCHASER NAME: BELLHAVEN INVESTMENTS LTD.
By: /s/ Patrick H. Thomson
Name: Patrick H. Thomson
Title: Authorized Signer
ADDRESS:
P.O. Box N-3813
Nassau, Bahamas
Tel: 1-242-356-7425
Fax: 1-242-300-8602
Number of shares of Series C Preferred C Preferred Stock to be purchased: 28
Number of Warrants to be purchased equals the Stated Value of the Series C
Preferred Stock to be purchased times 0.02
/ / Check here if Purchaser elects not to be bound by the 4.99% limitation on
conversions set forth in paragraph 5(c) of the Certificate of Designation.
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<PAGE> 37
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: CFO
PURCHASER NAME: E & D NO. 2 ACCOUNT, ADAM & CO. (NOMINEES) LTD.
By: /s/ Duncan Byatt
Name: Duncan Byatt
Title: Director
ADDRESS:
Eagle & Dominion Asset Management Ltd.
33 Throgmorton Street
London EC2N 2BR
Tel: 0171-861-9560
Fax: 0171-861-9563
Number of shares of Series C Preferred C Preferred Stock to be purchased: 20
Number of Warrants to be purchased equals the Stated Value of the Series C
Preferred Stock to be purchased times 0.02
/ / Check here if Purchaser elects not to be bound by the 4.99% limitation on
conversions set forth in paragraph 5(c) of the Certificate of Designation.
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<PAGE> 38
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: CFO
PURCHASER NAME: PEQUOT SCOUT FUND, L.P.
By: PEQUOT CAPITAL MANAGEMENT, INC.
Its Investment Adviser
By: /s/ David J. Malat
Name: David J. Malat
Title: CFO
ADDRESS:
500 Nyala Farm Road
Westport, CT 06880
Tel: 203-429-2200
Fax: 203-429-2430
Number of shares of Series C Preferred C Preferred Stock to be purchased: 1,441
Number of Warrants to be purchased equals the Stated Value of the Series C
Preferred Stock to be purchased times 0.02
/X/ Check here if Purchaser elects not to be bound by the 4.99% limitation on
conversions set forth in paragraph 5(c) of the Certificate of Designation.
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<PAGE> 39
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: CFO
PURCHASER NAME: INTERNATIONAL CAPITAL PARTNERS, INC. PROFIT-SHARING TRUST
By: /s/ Ajit G. Hutheesing
Name: Ajit G. Hutheesing
Title: Trustee
ADDRESS:
300 First Stamford Place
Stamford, CT
Tel: 203-961-8900
Fax: 203-969-2212
Number of shares of Series C Preferred C Preferred Stock to be purchased: 250
Number of Warrants to be purchased equals the Stated Value of the Series C
Preferred Stock to be purchased times 0.02
/X/ Check here if Purchaser elects not to be bound by the 4.99% limitation on
conversions set forth in paragraph 5(c) of the Certificate of Designation.
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<PAGE> 40
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: CFO
PURCHASER NAME: ARDARA INVESTMENT INC.
One Director:
DUCAT LTD
By: Two Directors: /s/ /s/
Name:
Title:
ADDRESS: Registered Office:
Vanterpool Plaza, Wickhams Cay 1
Road Town, Tortola, BVI
Tel:
Fax: 4122/709.29.24
Number of shares of Series C Preferred C Preferred Stock to be purchased: 1,000
Number of Warrants to be purchased equals the Stated Value of the Series C
Preferred Stock to be purchased times 0.02
/ / Check here if Purchaser elects not to be bound by the 4.99% limitation on
conversions set forth in paragraph 5(c) of the Certificate of Designation.
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<PAGE> 1
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of January 28,
1999, by and among Shared Technologies Cellular, Inc., a Delaware corporation
(the "Company"), and each of the entities whose names appear on the signature
pages hereof. Such entities are each referred to herein as a "Purchaser" and,
collectively, as the "Purchasers".
The Company has agreed, on the terms and subject to the conditions set
forth in the Securities Purchase Agreement of even date herewith (the
"Securities Purchase Agreement"), to issue and sell to each Purchaser shares
(the "Preferred Shares") of the Company's Series C Convertible Preferred Stock,
par value $.01 per share (the "Preferred Stock"), and a Warrant (each, a
"Warrant" and, when taken together with all of the warrants issued pursuant to
the Securities Purchase Agreement, the "Warrants") entitling the holder thereof
to purchase shares (the "Warrant Shares") of Common Stock. The Preferred Shares
are convertible pursuant to a Certificate of Designation (the "Certificate of
Designation") into shares (the "Conversion Shares") of the Company's Common
Stock, par value $.01 per share (the "Common Stock"). In order to induce the
Purchasers to enter into the Securities Purchase Agreement, the Company has
agreed to provide certain registration rights under the Securities Act of 1933,
as amended (the "Securities Act"), and under applicable state securities laws.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Securities Purchase Agreement.
In consideration of each Purchaser entering into the Securities Purchase
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
meanings specified:
(a) "Business Day", "Closing" and "Closing Date" shall have the
respective meanings specified in the Securities Purchase Agreement;
(b) "Holder" means any person owning or having the right to acquire,
through conversion of Preferred Shares or exercise of the Warrants,
or through the exercise or conversion of any securities issued to
such Holder in exchange for the Preferred Shares or Warrant,
including without limitation any securities issued to a Holder
pursuant to a Preemptive Exchange (as defined in the Certificate of
Designation), Registrable Securities, including initially each
Purchaser and thereafter any permitted assignee thereof;
(c) "Filing Deadline" means the thirtieth (30th) day following the
Closing Date;
(d) "Register", "registered" and "registration" refer to a
registration effected by
<PAGE> 2
preparing and filing a registration statement or statements in
compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act ("Rule 415") or any successor rule providing for
the offering of securities on a continuous or delayed basis
("Registration Statement"), and the declaration or ordering of
effectiveness of the Registration Statement by the Securities and
Exchange Commission (the "Commission");
(e) "Registration Deadline" means the sixtieth (60th) day following
the earlier to occur of (i) the date on which the Registration
Statement is filed with the Commission and (ii) the Filing Deadline;
(f) "Registrable Securities" means the Conversion Shares and the
Warrant Shares (each as defined in the Certificate of Designation),
and any other shares of Common Stock issuable pursuant to the terms
of the Preferred Stock or the Warrants, or pursuant to any
securities issued to a Holder in exchange for Preferred Stock or
Warrants, including without limitation any securities issued to a
Holder pursuant to a Preemptive Exchange (as defined in the
Certificate of Designation) whether as a payment of a redemption
price or otherwise, and any shares of capital stock issued or
issuable from time to time (with any adjustments) in replacement of,
in exchange for or otherwise in respect of the Conversion Shares,
the Warrant Shares or such other shares, including without
limitation any securities received by a Holder in connection with an
Exchange Transaction (as defined in the Certificate of Designation);
and
(g) "Blackout Period" means any period of one or more Business Days,
not to exceed ten (10) Business Days in any period of twelve
consecutive months, with respect to which (i) the Board of Directors
determines in good faith that, as a result of a transaction that the
Company is then considering, the Registration Statement or the
related prospectus contains an untrue statement of material fact or
omits to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading and (ii) the Corporation delivers notice thereof to
each Holder.
2. MANDATORY REGISTRATION.
(a) On or before the Filing Deadline, the Company shall prepare and
file with the Commission a Registration Statement on Form S-3 as a "shelf"
registration statement under Rule 415 covering the resale of at least 4,500,000
shares of Registrable Securities (such number subject to equitable adjustment
for the events specified in Section 6 of the Certificate of Designation) then
issuable on conversion of the Preferred Shares and exercise of the Warrants. The
Registration Statement shall state, to the extent permitted by Rule 416 under
the Securities Act, that it also covers such indeterminate number of shares of
Common Stock as may be required to effect conversion of the Preferred Shares or
exercise of the Warrants, as the case may be, to prevent dilution resulting from
stock splits, stock dividends or similar events. The amount of Registrable
Securities registered pursuant
<PAGE> 3
to this paragraph (a) shall be allocated among the Holder in same proportion as
the number of Preferred Shares purchased by each Holder under the Stock Purchase
Agreement bears to the aggregate number of Preferred Shares purchased by all of
the Holders thereunder; and any increase to the number of Registrable Securities
registered pursuant to this Agreement shall be allocated among the Holders in
same proportion as the number of Registrable Securities issuable to each Holder
upon conversion of the Preferred Shares and exercise of the Warrants held by
such Holder at the time of such increase (assuming for such purpose that such
conversion or exercise were to occur as of the time of such increase and without
regard to any restriction or limitation on such conversion or exercise) bears to
the aggregate number of Registrable Securities issuable to all of the Holders
upon conversion of the Preferred Shares and exercise of the Warrants held by
such Holders at the time of such increase (assuming for such purpose that such
conversion or exercise were to occur as of the time of such increase and without
regard to any restriction or limitation on such conversion or exercise). The
amount of registered Registrable Securities that is allocated to a Holder as
provided herein is referred to herein as such Holder's "Allocated Registered
Amount".
(b) The Company shall use its best efforts to cause the Registration
Statement to become effective as soon as practicable following the filing
thereof, but in no event later than the Registration Deadline. The Company shall
respond promptly to any and all comments made by the staff of the Commission on
the Registration Statement (but in no event later than ten (10) Business Days
following the Company's receipt thereof), and shall submit to the Commission,
within one (1) Business Day after the Company learns that no review of the
Registration Statement will be made by the staff of the Commission or that the
staff of the Commission has no further comments on the Registration Statement,
as the case may be, a request for acceleration of the effectiveness of the
Registration Statement to a time and date not later than forty eight (48) hours
after the submission of such request, and maintain the effectiveness of the
Registration Statement until the earlier to occur of (i) the date on which all
of the Registrable Securities have been sold pursuant to the Registration
Statement and (ii) the date on which all of the remaining Registrable Securities
(in the reasonable opinion of counsel to the Holders of a majority of the
Registrable Securities then outstanding) may be immediately sold to the public
without registration and without regard to the amount of Registrable Securities
which may be sold by a Holder thereof at a given time (the "Registration
Period").
(c) If (A) the Registration Statement is not filed on or before the
Filing Deadline or declared effective by the Commission on or before the
Registration Deadline, (B) after the Registration Statement has been declared
effective by the Commission, sales of Registrable Securities cannot be made by a
Holder under the Registration Statement for any reason not within the exclusive
control of such Holder (other than such Registrable Securities as are then
freely saleable pursuant to Rule 144(k) under the Securities Act and other than
during a Blackout Period), or (C) the Common Stock is not listed and freely
tradeable on the Nasdaq SmallCap Market, the Nasdaq National Market System or
the New York Stock Exchange (each of (A), (B) or (C) being referred to herein as
a "Default Event"), and the such Default Event occurs as a result of any willful
action or willful failure to act on the part of the Company, the Company shall
pay to each Holder an amount equal to the lesser of (x) one percent (1%) per
thirty calendar day period (prorated for any period of less than thirty calendar
days) and (y) the highest rate permitted by applicable law, times the aggregate
Liquidation Preference (as defined in the
<PAGE> 4
Certificate of Designation) of the Preferred Shares held by such Holder,
accruing daily and compounded monthly, from the date on which a Default Event
occurs until the date on which such Default Event and any and all other Default
Events have been cured and are no longer continuing. The amounts paid or payable
by the Company hereunder shall be in addition to any other remedies available to
each Holder at law or in equity or pursuant to the terms hereof, any other
Transaction Document or the Certificate of Designation. Payments of cash
pursuant hereto shall be made within five (5) days after the end of each period
that gives rise to such obligation, provided that, if any such period extends
for more than thirty (30) calendar days, payments shall be made at the end of
each thirty-day period.
(d) In the event that (A) the Registration Statement is not declared
effective by the sixtieth (60th) Business Day following the Registration
Deadline, (B) after the Registration Statement has been declared effective by
the Commission, sales of Registrable Securities cannot be made by a Holder under
the Registration Statement for any reason not within the exclusive control of
such Holder (other than such Registrable Securities as are then freely saleable
pursuant to Rule 144(k) under the Securities Act and other than during a
Blackout Period), or (C) the Common Stock is not listed and freely tradeable on
the Nasdaq SmallCap Market, the Nasdaq National Market System or the New York
Stock Exchange (each event described in clause (A), (B) or (C) being hereinafter
referred to as a "Repricing Event"), in addition to the amounts which may be
payable pursuant to paragraph 2(c) above (and any other remedies available to
the Holders), the Fixed Conversion Price (as defined in the Certificate of
Designation) for any conversion of Preferred Shares occurring on a Conversion
Date (as defined in the Certificate of Designation) following the occurrence of
such Repricing Event shall be deemed to be equal to the lesser of (i) the lowest
Conversion Price (as defined in the Certificate of Designation) that would have
applied had such conversion occurred during the period between the date on which
a Repricing Event occurs and the date on which such Repricing Event and any and
all other Repricing Events have been cured and are no longer continuing and (ii)
the Fixed Conversion Price that would otherwise be in effect on such Conversion
Date.
3. OBLIGATIONS OF THE COMPANY.
In addition to performing its obligations hereunder, including without
limitation those pursuant to paragraphs 2(a) and 2(b) above, the Company shall:
(a) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary to comply with the
provisions of the Securities Act or to maintain the effectiveness of the
Registration Statement during the Registration Period, or as may be reasonably
requested by a Holder in order to incorporate information concerning such Holder
or such Holder's intended method of distribution;
(b) in the event that a Holder's Allocated Registered Amount is
insufficient on any date to cover (i) the number of Registrable Securities
issuable to such Holder upon conversion of the Preferred Shares and exercise of
the Warrants held by such Holder (assuming for such purpose that such conversion
or exercise were to occur in full on each of such trading days without regard to
any
<PAGE> 5
restriction or limitation on such conversion or exercise, other than the
limitation pursuant represented by the Conversion Limit Amount (as defined in
the Certificate)), plus (ii) the number of Registrable Securities issued to such
Holder and which remain unsold, the Company shall promptly amend the
Registration Statement, or file a new Registration Statement, or both, so as to
cover all of such Registrable Securities, in any event as soon as practicable,
but not later than the tenth Business Day following such date . Any Registration
Statement filed pursuant to this Section 3 shall state that, to the extent
permitted by Rule 416 under the Securities Act, such Registration Statement also
covers such indeterminate number of additional Registrable Securities as may be
required to effect conversion of the Preferred Shares or exercise of the
Warrants, as the case may be, to prevent dilution resulting from stock splits,
stock dividends or similar events. Unless and until such amendment or new
Registration Statement becomes effective, each Holder shall have the rights
described in Section 2 above;
(c) use its best efforts to secure the listing of all Registrable
Securities on the Nasdaq SmallCap Market, Nasdaq National Market System or the
New York Stock Exchange prior to the date on which the Registration Statement
relating to such Registrable Securities becomes effective;
(d) furnish to each Holder such number of copies of the prospectus
included in such Registration Statement, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other documents
as such Holder may reasonably request in order to facilitate the disposition of
such Holder's Registrable Securities;
(e) use all commercially reasonable efforts to register or qualify
the Registrable Securities under the securities or "blue sky" laws of such
jurisdictions within the United States as shall be reasonably requested from
time to time by a Holder, and do any and all other acts or things which may be
necessary or advisable to enable such Holder to consummate the public sale or
other disposition of the Registrable Securities in such jurisdictions; provided
that the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such jurisdiction;
(f) in the event of an underwritten public offering of the
Registrable Securities, enter into and perform its obligations under an
underwriting agreement, in usual and customary form reasonably acceptable to the
Company, with the managing underwriter of such offering;
(g) notify each Holder immediately upon the occurrence of any event
as a result of which the prospectus included in such Registration Statement, as
then in effect, contains an untrue statement of material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing,
and as promptly as practicable, prepare, file and furnish to each Holder a
reasonable number of copies of a supplement or an amendment to such prospectus
as may be necessary so that such prospectus does not contain an untrue statement
of material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing; and, in the event that the Company notifies the
Holders of the imposition of a Blackout Period, the Company shall notify each
Holder immediately upon the expiration of such Blackout Period;
<PAGE> 6
(h) use all commercially reasonable efforts to prevent the issuance
of any stop order or other order suspending the effectiveness of such
Registration Statement and, if such an order is issued, to obtain the withdrawal
thereof at the earliest possible time and to notify each Holder of the issuance
of such order and the resolution thereof;
(i) furnish to each Holder, on the date that such Registration
Statement becomes effective, a letter, dated such date, of outside counsel
representing the Company (and reasonably acceptable to such Holder) addressed to
such Holder, confirming the effectiveness of the Registration Statement and, to
the knowledge of such counsel, the absence of any stop order;
(j) provide each Holder and its representatives the opportunity to
conduct a reasonable inquiry of the Company's financial and other records during
normal business hours and make available its officers, directors and employees
for questions regarding information which such Holder may reasonably request in
order to fulfill any due diligence obligation on its part; and
(k) permit counsel for the Holders of a majority of the Registrable
Securities to review the Registration Statement and all amendments and
supplements thereto, and any comments made by the staff of the Commission and
the Company's responses thereto, a reasonable period of time prior to the filing
thereof with the Commission.
4. OBLIGATIONS OF EACH HOLDER.
In connection with the registration of the Registrable Securities pursuant
to the Registration Statement, each Holder shall:
(a) furnish to the Company such information regarding itself and the
intended method of disposition of Registrable Securities as the Company shall
reasonably request in order to effect the registration thereof;
(b) upon receipt of any notice from the Company of the happening of
any event of the kind described in paragraphs 3(g) or 3(h), immediately
discontinue any sale or other disposition of Registrable Securities pursuant to
the Registration Statement until the filing of an amendment or supplement as
described in paragraph 3(g) or withdrawal of the stop order referred to in
paragraph 4(h);
(c) in the event of an underwritten offering of the Registrable
Securities, enter into a customary and reasonable underwriting agreement and
execute such other documents as the managing underwriter for such offering may
reasonably request;
(d) to the extent required by applicable law, deliver a prospectus
to each purchaser of Registrable Securities; and
(e) notify the Company when it has sold all of the Registrable
Securities theretofore
<PAGE> 7
held by it.
5. INDEMNIFICATION.
In the event that any Registrable Securities are included in a
Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company shall indemnify and
hold harmless each Holder, the officers, directors, employees, agents and
representatives of such Holder, and each person, if any, who controls such
Holder within the meaning of the Securities Act or the Securities Exchange Act
of 1934, as amended (the "1934 Act"), against any losses, claims, damages,
liabilities or reasonable out-of-pocket expenses (whether joint or several)
(collectively, including legal or other expenses reasonably incurred in
connection with investigating or defending same, "Losses"), insofar as any such
Losses arise out of or are based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in such Registration Statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The Company will reimburse such Holder, and each such
officer, director, employee, agent, representative or controlling person for any
legal or other expenses as reasonably incurred by any such entity or person in
connection with investigating or defending any Loss; provided, however, that the
foregoing indemnity shall not apply to amounts paid in settlement of any Loss if
such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be obligated to
indemnify any person for any Loss to the extent that such Loss arises out of or
is based upon and in conformity with written information furnished by such
person expressly for use in such Registration Statement; and provided, further,
that the Company shall not be required to indemnify any person to the extent
that any Loss results from such person selling Registrable Securities (i) to a
person to whom there was not sent or given, at or prior to the written
confirmation of the sale of such shares, a copy of the prospectus, as most
recently amended or supplemented, if the Company has previously furnished or
made available copies thereof or (ii) during any period following written notice
by the Company to such Holder of an event described in Section 3(g) or 3(h).
(b) To the extent permitted by law, each Holder, acting severally
and not jointly, shall indemnify and hold harmless the Company, the officers,
directors, employees, agents and representatives of the Company, and each
person, if any, who controls the Company within the meaning of the Securities
Act or the 1934 Act, against any Losses to the extent (and only to the extent)
that any such Losses arise out of or are based upon and in conformity with
written information furnished by such Holder expressly for use in such
Registration Statement; and such Holder will reimburse any legal or other
expenses as reasonably incurred by the Company and any such officer, director,
employee, agent, representative, or controlling person, in connection with
investigating or defending any such Loss; provided, however, that the foregoing
indemnity shall not apply to amounts paid in settlement of any such Loss if such
settlement is effected without the consent of such Holder, which consent shall
not be unreasonably withheld; provided, that, in no event shall any indemnity
<PAGE> 8
under this subsection 5(b) exceed the net purchase price of securities sold by
such Holder under the Registration Statement.
(c) Promptly after receipt by an indemnified party under this
Section 5 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 5, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in and to assume the
defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the reasonably incurred fees and expenses of one such counsel to
be paid by the indemnifying party, if representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate under
applicable standards of professional conduct due to actual or potential
conflicting interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, to the extent prejudicial to its ability to defend such action,
shall relieve such indemnifying party of any liability to the indemnified party
under this Section 5 with respect to such action, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 5 or
with respect to any other action unless the indemnifying party is materially
prejudiced as a result of not receiving such notice.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 5 is unavailable or insufficient to hold harmless an indemnified
party for any reason, the Company and each Holder agree, severally and not
jointly, to contribute to the aggregate Losses to which the Company or such
Holder may be subject in such proportion as is appropriate to reflect the
relative fault of the Company and such Holder in connection with the statements
or omissions which resulted in such Losses; provided, however, that in no case
shall such Holder be responsible for any amount in excess of the net purchase
price of securities sold by it under the Registration Statement. Relative fault
shall be determined by reference to whether any alleged untrue statement or
omission relates to information provided by the Company or by such Holder. The
Company and each Holder agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (d), no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. For purposes of this Section 5,
each person who controls a Holder within the meaning of either the Securities
Act or the Exchange Act and each officer, director, employee, agent or
representative of such Holder shall have the same rights to contribution as such
Holder, and each person who controls the Company within the meaning of either
the Securities Act or the Exchange Act and each officer, director, employee,
agent or representative of the Company shall have the same rights to
contribution as the Company, subject in each case to the applicable terms and
conditions of this paragraph (d).
(e) The obligations of the Company and each Holder under this
Section 5 shall
<PAGE> 9
survive the conversion or redemption, if any, of the Preferred Shares, the
exercise of the Warrant, the completion of any offering of Registrable
Securities pursuant to a Registration Statement under this Agreement, or
otherwise.
6. REPORTS.
With a view to making available to each Holder the benefits of Rule 144
under the Securities Act ("Rule 144") and any other similar rule or regulation
of the Commission that may at any time permit such Holder to sell securities of
the Company to the public without registration, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the 1934
Act; and
(c) furnish to such Holder, so long as such Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company, if true, that it has complied with the reporting requirements of Rule
144, the Securities Act and the 1934 Act, (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so filed
by the Company, and (iii) such other information as may be reasonably requested
in availing such Holder of any rule or regulation of the Commission which
permits the selling of any such securities without registration.
7. MISCELLANEOUS.
(a) Expenses of Registration. All expenses, other than underwriting
discounts and commissions and fees and expenses of counsel to each Holder,
incurred in connection with the registrations, filings or qualifications
described herein, including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees, the fees and disbursements of
counsel for the Company, and the fees and disbursements incurred in connection
with the opinion and letter described in paragraph 3(i) hereof, shall be borne
by the Company.
(b) Amendment; Waiver. Any provision of this Agreement may be
amended only pursuant to a written instrument executed by the Company and
Holders of at least two thirds (2/3) of (i) the number of outstanding
Registrable Securities plus (ii) the number of Registrable Securities into which
the Preferred Shares and Warrants then outstanding are convertible or
exercisable, as the case may be (at the conversion or exercise price then in
effect and without regard to any limitation on such conversion or exercise that
may otherwise apply). Any waiver of the provisions of this Agreement may be made
only pursuant to a written instrument executed by the party against whom
enforcement is sought. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each Holder, each future Holder, and the
Company. The failure of any party to exercise any right or
<PAGE> 10
remedy under this Agreement or otherwise, or the delay by any party in
exercising such right or remedy, shall not operate as a waiver thereof.
(c) Notices. Any notice, demand or request required or permitted to
be given by any party to any other party pursuant to the terms of this Agreement
shall be in writing and shall be deemed given (i) when delivered personally or
by verifiable facsimile transmission (with an original to follow) on or before
5:00 p.m., eastern time, on a Business Day or, if such day is not a Business
Day, on the next succeeding Business Day, (ii) on the next Business Day after
timely delivery to a nationally-recognized overnight courier and (iii) on the
Business Day actually received if deposited in the U.S. mail (certified or
registered mail, return receipt requested, postage prepaid), addressed to the
parties as follows:
If to the Company:
Shared Technologies Cellular, Inc.
100 Great Meadow Road
Suite 100
Wethersfield, CT 06109
Attn: Legal Department
Tel: (860) 258-2500
Fax: (860) 258-2455
with a copy to:
Day, Berry & Howard LLP
260 Franklin Street
Boston MA 02110
Attn: Jeffrey A. Clopeck, Esq.
Tel: (617) 345-4600
Fax: (617) 345-4745
and if to any Holder, to such address as shall be designated by such Holder in
writing to the Company.
(d) Termination. This Agreement shall terminate on the earlier to
occur of (a) the end of the Registration Period and (b) the date on which all of
the Registrable Securities have been publicly distributed; but any such
termination shall be without prejudice to (i) the parties' rights and
obligations arising from breaches of this Agreement occurring prior to such
termination and (ii) the indemnification and contribution obligations under this
Agreement.
(e) Assignment. Upon the transfer of Preferred Shares, Warrants or
Registrable Securities by a Holder, the rights of such Holder hereunder with
respect to the securities so transferred shall be assigned automatically to the
transferee thereof as long as: (i) the Company is, within a reasonable period of
time following such transfer, furnished with written notice of the name and
<PAGE> 11
address of such transferee, (ii) the transferee agrees in writing with the
Company to be bound by all of the provisions hereof and (iii) such transfer is
made in accordance with the applicable requirements of the Securities Purchase
Agreement or the Warrant, as the case may be.
(f) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall be deemed one and the same instrument. This Agreement, once
executed by a party, may be delivered to any other party hereto by facsimile
transmission.
(g) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to the
conflict of laws provisions thereof.
[Remainder of Page Intentionally Left Blank]
<PAGE> 12
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name:Vincent DiVincenzo
Title: CFO
PURCHASER NAME: MARSHALL CAPITAL MANAGEMENT, INC.
By: /s/ Allan Weine
Name: Allan Weine
Title: President
12
<PAGE> 13
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name:Vincent DiVincenzo
Title: CFO
PURCHASER NAME: MARCUARD COOK & CIE S.A.
By: /s/ Mark Cook /s/ Jean-Luc Girod
Name: Mark Cook Jean-Luc Girod
Title: Manager Manager
12
<PAGE> 14
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name:Vincent DiVincenzo
Title: CFO
PURCHASER NAME: TROWER FT
By: /s/ A. Trower
Name: A. Trower
Title: Fund Manager
12
<PAGE> 15
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name:Vincent DiVincenzo
Title: CFO
PURCHASER NAME: THE TRIDENT NORTH ATLANTIC FUND
By: /s/ Christopher Mills
Name: Christopher Mills
Title: Director
12
<PAGE> 16
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name:Vincent DiVincenzo
Title: CFO
PURCHASER NAME: THORNHILL INVESTMENT MANAGEMENT LIMITED
ACCOUNT C
By: /s/ Christopher Chamberlain
Name: Christopher Chamberlain
Title: Director
12
<PAGE> 17
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name:Vincent DiVincenzo
Title: CFO
PURCHASER NAME: THORNHILL INVESTMENT MANAGEMENT LIMITED
ACCOUNT B
By: /s/ Christopher Chamberlain
Name: Christopher Chamberlain
Title: Director
12
<PAGE> 18
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name:Vincent DiVincenzo
Title: CFO
PURCHASER NAME: PECQUOT SCOUT FUND, L.P.
By: PEQUOT CAPITAL MANAGEMENT, INC.
Its Investment Adviser
By: /s/ David J. Malat
Name: David J. Malat
Title: CFO
12
<PAGE> 19
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name:Vincent DiVincenzo
Title: CFO
PURCHASER NAME: OAKES FITZWILLIAMS & CO. S.A.
By: /s/ Herbert L. Oakes, Jr.
Name: Herbert L. Oakes, Jr.
Title: Director
12
<PAGE> 20
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By:/s/ Vincent DiVincenzo
Name:Vincent DiVincenzo
Title: CFO
PURCHASER NAME: OAKES FITZWILLIAMS & CO. LIMITED
By: /s/ Herbert Oakes
Name: Herbert Oakes
Title: Director
12
<PAGE> 21
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name:Vincent DiVincenzo
Title: CFO
PURCHASER NAME: NCL INVESTMENTS LTD A/C NCL (NOMINEES) LTD
By: /s/ D.H. Hunter
Name: D.H. Hunter
Title: Director
12
<PAGE> 22
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name:Vincent DiVincenzo
Title: CFO
PURCHASER NAME: LUPTON ESTATES LIMITED
By: /s/ C. Edmunds Allen
Name: C. Edmunds Allen
Title: Director
12
<PAGE> 23
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name:Vincent DiVincenzo
Title: CFO
PURCHASER NAME: INTERNATIONAL CAPITAL PARTNERS, INC. PROFIT-
SHARING TRUST
By: /s/ Ajit G. Hutheesing
Name: Ajit G. Hutheesing
Title: Trustee
12
<PAGE> 24
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name:Vincent DiVincenzo
Title: CFO
PURCHASER NAME: MEINL BANK AG
By: /s/ Robert Kofler By: /s/ Claudia Wegscheidler
Name: Robert Kofler Name: Claudia Wegscheidler
Title: Member of the Title: Deputy Manager
Managing Board
12
<PAGE> 25
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name:Vincent DiVincenzo
Title: CFO
PURCHASER NAME: AAGC ABN AMRO BANK NV
By: /s/ R.F. Bastiaenon
Name: R.F. Bastiaenon
Title: Head Trading Dep.
Private Banking
12
<PAGE> 26
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name:Vincent DiVincenzo
Title: CFO
PURCHASER NAME: GRANGE NOMINEES LIMITED
By: /s/ Janet Laine
Name: Janet Laine
Title: Authorized Signatory
12
<PAGE> 27
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name:Vincent DiVincenzo
Title: CFO
PURCHASER NAME: E & D NO. 2 ACCOUNT, ADAM & CO. (NOMINEES) LTD.
By: /s/ Duncan Byatt
Name: Duncan Byatt
Title: Director
12
<PAGE> 28
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name:Vincent DiVincenzo
Title: CFO
PURCHASER NAME: BELLHAVEN INVESTMENTS LTD.
By: /s/ Patrick H. Thomson
Name: Patrick H. Thomson
Title: Authorized Signer
12
<PAGE> 29
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name:Vincent DiVincenzo
Title: CFO
PURCHASER NAME: DULVILLE LIMITED
By: /s/ Luisa Raez
Name: Luisa Raez
Title: Sole Director
12
<PAGE> 30
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name:Vincent DiVincenzo
Title: CFO
PURCHASER NAME: EAGLE & DOMINION EURO AMERICAN GROWTH FUND LTD.
By: /s/ Duncan Byatt
Name: Duncan Byatt
Title: Director
12
<PAGE> 31
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name:Vincent DiVincenzo
Title: CFO
PURCHASER NAME: EAGLE & DOMINION EURO AMERICAN GROWTH FUND L.P.
By: /s/ Duncan Byatt
Name: Duncan Byatt
Title: Director of General Partner
12
<PAGE> 32
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: /s/ Vincent DiVincenzo
Name:Vincent DiVincenzo
Title: CFO
PURCHASER NAME: ARDARA INVESTMENT INC.
One Director:
DUCAT LTD
By: Two Directors: /s/ /s/
Name:
Title:
12
<PAGE> 1
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED FOR SALE, SOLD OR
TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS SHALL BE EFFECTIVE WITH RESPECT THERETO, OR AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
Warrant to Purchase
_____________Shares
WARRANT TO PURCHASE COMMON STOCK
OF
SHARED TECHNOLOGIES CELLULAR, INC.
THIS CERTIFIES that __________________________________________ or any
subsequent holder hereof (the "Holder"), has the right to purchase from Shared
Technologies Cellular, Inc., a Delaware corporation (the "Company"), up to
_____________________________ fully paid and nonassessable shares of the
Company's Common Stock, par value $.01 per share (the "Common Stock"), subject
to adjustment as provided herein, at a price equal to the Exercise Price (as
defined below), at any time beginning on the date on which this Warrant is
issued (the "Issue Date") and ending at 5:00 p.m., eastern time, on the date
that is the fifth anniversary of the Issue Date (the "Expiration Date"). This
Warrant is issued, and all rights hereunder shall be, subject to all of the
conditions, limitations and provisions set forth herein and in the Securities
Purchase Agreement of even date herewith by and among the Company and the
Purchasers named therein (the "Securities Purchase Agreement").
1. Exercise.
(a) Right to Exercise; Exercise Price. The Holder shall have the right
to exercise this Warrant at any time and from time to time up to and including
the Expiration Date as to all or any part of the shares of Common Stock covered
hereby (the "Warrant Shares"). The "Exercise Price" payable
<PAGE> 2
by the Holder in connection with the exercise of this Warrant shall be equal to
$9.00 (subject to adjustment as specified in paragraph 7 hereof).
(b) Exercise Notice. In order to exercise this Warrant, the Holder
shall send by facsimile transmission, at any time prior to 11:59 p.m., eastern
time, on the date on which the Holder wishes to effect such exercise (the
"Exercise Date"), to the Company and to its designated transfer agent for the
Common Stock (the "Transfer Agent") a copy of the notice of exercise in the form
attached hereto as Exhibit A (the "Exercise Notice") stating the number of
Warrant Shares as to which such exercise applies and the calculation therefor.
The Holder shall thereafter deliver to the Company the original Exercise Notice,
the original Warrant and the Exercise Price. In the case of a dispute as to the
calculation of the Exercise Price or the number of Warrant Shares issuable
hereunder, the Company shall promptly issue to the Holder the number of Warrant
Shares that are not disputed and shall submit the disputed calculations to the
Company's independent accountant within one (1) business day following the
Exercise Date. The Company shall cause such accountant to calculate the Exercise
Price and/or the number of Warrant Shares issuable hereunder and to notify the
Company and the Holder of the results in writing no later than two business days
following the day on which it received the disputed calculations. Such
accountant's calculation shall be deemed conclusive absent manifest error. The
fees of any such accountant shall be borne by the party whose calculations were
most at variance with those of such accountant.
(c) Cancellation of Warrant. This Warrant shall be canceled upon its
exercise and, if this Warrant is exercised in part, the Company shall, at the
time that it delivers Warrant Shares to the Holder pursuant to such exercise as
provided herein, issue a new warrant, and deliver to the Holder a certificate
representing such new warrant, with terms identical in all respects to this
Warrant (except that such new warrant shall be exercisable into the number of
shares of Common Stock with respect to which this Warrant shall remain
unexercised); provided, however, that the Holder shall be entitled to exercise
all or any portion of such new warrant at any time following the time at which
this Warrant is exercised, regardless of whether the Company has actually issued
such new warrant or delivered to the Holder a certificate therefor.
2. Delivery of Warrant Shares Upon Exercise. Upon receipt of a Exercise
Notice pursuant to paragraph 1 above, the Company shall, (A) in the case of a
Cashless Exercise (as defined below), no later than the close of business on the
third (3rd) business day following the Exercise Date set forth in such Exercise
Notice, (B) in the case of a Cash Exercise (as defined below) no later than the
close of business on the earlier to occur of (i) the third (3rd) business day
following the Exercise Date set forth in such Exercise Notice and (ii) such
later date on which the Company shall have received payment of the Exercise
Price, and (C) with respect to Warrant Shares which are disputed as described in
paragraph 1(b) above, and required to be delivered by the Company pursuant to
the accountant's calculations described therein, the date for delivery thereof
specified in such paragraph 1(b) (the "Delivery Date"), issue and deliver or
caused to be delivered to the Holder the number of Warrant Shares as shall be
determined as provided herein. Warrant Shares delivered to the Holder shall not
-2-
<PAGE> 3
contain any restrictive legend as long as the sale of such Warrant Shares is
covered by an effective Registration Statement (as defined in the Registration
Rights Agreement) or may be made pursuant to Rule 144(k) under the Securities
Act of 1933, as amended, or any successor rule or provision.
3. Mandatory Exercise.
(a) Mandatory Exercise. The Company shall have the right, upon the
satisfaction of each of the Mandatory Exercise Conditions (as defined below), to
require that the Holder exercise the portion of this Warrant that remains
unexercised on the Mandatory Exercise Date (as defined below)(a "Mandatory
Exercise"). In the event of a Mandatory Exercise, the Company and each Holder
shall follow the procedures for exercise set forth in Section 1 above, with the
Mandatory Exercise Date (as defined below) deemed to be the Exercise Date,
except that a Holder shall not be required to send an Exercise Notice as
contemplated by paragraph (b) of Section 1.
(b) Mandatory Exercise Notice. In order to effect a Mandatory Exercise
hereunder, the Company must deliver to each Holder written notice thereof (a
"Mandatory Exercise Notice") on or before 5:00 p.m. (eastern time) on a Business
Day (the "Mandatory Exercise Notice Date") that (i) occurs on or before the
third Business Day immediately following the last Trading Day of the Mandatory
Exercise Period (as defined below) and (ii) is not less than fifteen (15)
Trading Days prior to the date on which such Mandatory Exercise is to be
effected (the "Mandatory Exercise Date") and, at the same time that it delivers
such notice, the Company shall confirm delivery thereof with each Holder by
telephone, either personally or by voicemail message. Notwithstanding the
delivery by the Company of a Mandatory Exercise Notice, nothing contained herein
shall be deemed to limit in any way (i) the right of a Holder to exercise this
Warrant prior to the Mandatory Exercise Date or (ii) the availability of any and
all remedies that are provided to a Holder hereunder, including without
limitation in the event that the Company fails to deliver Warrant Shares upon a
Mandatory Exercise as required by the terms of Section 1 hereof.
(c) Mandatory Exercise Conditions. The Mandatory Exercise Conditions
are as follows:
(i) the Closing Bid Price shall have been equal to or
greater than $18.00 (subject to equitable adjustment
for the events specified in paragraph 7 hereof) for
five (5) consecutive Trading Days (such 5-Trading Day
period being referred to herein as a "Mandatory
Exercise Period");
(ii) at all times during the Mandatory Exercise Period, on
the Mandatory Exercise Notice Date and at all times
during the period from the Mandatory Exercise Notice
Date through the Mandatory Exercise Date, (x) a
registration statement filed under the Securities Act
shall be effective and available to the Holders for
the sale of all of the shares of Common Stock into
which the Preferred Shares and Warrants then
outstanding are convertible or exercisable, as the
-3-
<PAGE> 4
case may be (without regard to any restriction or
limitation on the conversion thereof), or such shares
may be sold under Rule 144(k), (y) the Common Stock
shall be listed on the Nasdaq SmallCap Market, the
Nasdaq National Market System or the New York Stock
Exchange, and (z) trading in the Common Stock, or
trading generally, shall not have been suspended by
the principal market on which the Common Stock is
traded;
(iii) the Company shall not have breached, at any time
prior to the Mandatory Exercise Date, any material
agreement or obligation hereunder or under the
Securities Purchase Agreement or the Registration
Rights Agreement; and
(iv) a Mandatory Redemption Event (as defined in the
Certificate of Designation) shall not have occurred
and be continuing as of the Mandatory Exercise Notice
Date or the Mandatory Exercise Date.
4. Failure to Deliver Warrant Shares.
(a) Exercise Default. In the event that the Company fails for
any reason as a result of any willful action or any willful failure to act on
the part of the Corporation (other than by operation of paragraph 5 below) to
deliver to a Holder certificates representing the number of Warrant Shares
specified in the applicable Exercise Notice on or before the Delivery Date
therefor and such failure continues for ten (10) Business Days following the
delivery of written notice thereof from the Holder (an "Exercise Default"), the
Company shall pay to the Holder payments ("Exercise Default Payments") in the
amount of (i) (N/365) multiplied by (ii) the aggregate Exercise Price for the
Warrant Shares which are the subject of such Exercise Default multiplied by
(iii) the lower of ten percent (10%) and the maximum rate permitted by
applicable law, where "N" equals the number of days elapsed between the original
Delivery Date for such Warrant Shares and the date on which all of such Warrant
Shares are issued and delivered to the Holder. Amounts payable under this
subparagraph 4(a) shall be paid to the Holder in immediately available funds on
or before the fifth (5th) business day of the calendar month immediately
following the calendar month in which such amount has accrued.
(b) Buy-in. Nothing herein shall limit a Holder's right to
pursue actual damages for the Company's failure to issue and deliver Warrant
Shares in connection with an exercise on the applicable Delivery Date
(including, without limitation, damages relating to any purchase of shares of
Common Stock by the Holder to make delivery on a sale effected in anticipation
of receiving Warrant Shares upon exercise, such damages to be in an amount equal
to (A) the aggregate amount paid by the Holder for the shares of Common Stock so
purchased minus (B) the aggregate amount of net proceeds, if any, received by
the Holder from the sale of the Warrant Shares issued by the Company pursuant to
such exercise), and the Holder shall have the right to pursue all remedies
available to it at law or in equity (including, without limitation, a decree of
specific performance and/or injunctive relief).
-4-
<PAGE> 5
(c) Reduction of Exercise Price. In the event that a Holder
has not received certificates representing the Warrant Shares by the tenth
(10th) business day following an Exercise Default, the Holder may, upon written
notice to the Company, regain on such business day the rights of a Holder of
this Warrant, or part thereof, with respect to the Warrant Shares that are the
subject of such Exercise Default, and the Exercise Price for such Warrant Shares
shall be reduced by one percent (1%) for each day beyond such 10th business day
in which the Exercise Default continues. In such event, the Holder shall retain
all of the Holder's rights and remedies with respect to the Company's failure to
deliver such Warrant Shares (including without limitation the right to receive
the cash payments specified in subparagraph 4(a) above).
(d) Holder of Record. Each Holder shall, for all purposes, be
deemed to have become the holder of record of Warrant Shares on the Exercise
Date of this Warrant, irrespective of the date of delivery of such Warrant
Shares. Nothing in this Warrant shall be construed as conferring upon the Holder
hereof any rights as a stockholder of the Company prior to the Exercise Date.
[5. Exercise Limitations.
In no event shall a Holder be permitted to exercise this Warrant, or
part thereof, with respect to Warrant Shares in excess of the number of such
shares, upon the issuance of which, (x) the number of shares of Common Stock
beneficially owned by the Holder plus (y) the number of shares of Common Stock
issuable upon such exercise, would be equal to or exceed (z) 4.99% of the number
of shares of Common Stock then issued and outstanding. To the extent that the
limitation contained in this paragraph 5 applies, the determination of whether
this Warrant is exercisable (in relation to other securities owned by a Holder)
shall be in the sole discretion of the Holder, and the submission of an Exercise
Notice shall be deemed to be the Holder's determination that this Warrant is
exercisable pursuant to the terms hereof, and the Company shall have no
obligation whatsoever to verify or confirm the accuracy of such determination.
Nothing contained herein shall be deemed to restrict the right of a Holder to
exercise this Warrant, or part thereof, at such time as such exercise will not
violate the provisions of this Section 4.][THIS PROVISION WILL NOT BE CONTAINED
IN ANY WARRANT ISSUED TO A PURCHASER WHICH ELECTED NOT TO BE BOUND BY THE 4.99%
LIMITATION CONTAINED IN THE CERTIFICATE OF DESIGNATION]
6. Payment of the Exercise Price. The Holder may pay the Exercise Price
in either of the following forms or, at the election of Holder, a combination
thereof; provided, however, that from and after the date that is two (2) years
from the Issue Date, the Holder may elect to exercise this Warrant only pursuant
to a Cashless Exercise (as defined below):
(a) Cash Exercise: by delivery of immediately available funds.
-5-
<PAGE> 6
(b) Cashless Exercise: by surrender of this Warrant to the Company
together with a notice of cashless exercise, in which event the Company shall
issue to the Holder the number of Warrant Shares determined as follows:
X = Y x (A-B)/A
where: X = the number of Warrant Shares to be issued to the
Holder.
Y = the number of Warrant Shares with respect to
which this Warrant is being exercised.
A = the average of the Closing Bid Prices of the
Common Stock for the five (5) Trading Days
immediately prior to (but not including) the Exercise
Date.
B = the Exercise Price.
For purposes of Rule 144 under the Securities Act of 1933, as amended, it is
intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to have
been commenced, on the Issue Date.
7. Anti-Dilution Adjustments.
(a) Stock Dividend. If the Company shall at any time declare a dividend
payable in shares of Common Stock, then the Holder hereof, upon exercise of this
Warrant after the record date for the determination of Holders of Common Stock
entitled to receive such dividend, shall be entitled to receive, in addition to
the number of shares of Common Stock as to which this Warrant is exercised, such
additional shares of Common Stock as the Holder would have received had this
Warrant been exercised immediately prior to such record date and the Exercise
Price will be proportionately adjusted.
(b) Stock Split, Recapitalization or Reclassification. If the Company
shall at any time effect a stock split, recapitalization, reclassification or
other similar transaction of such character that the shares of Common Stock
shall be changed into or become exchangeable for a larger or smaller number of
shares, then upon the effective date thereof, the number of shares of Common
Stock which the Holder hereof shall be entitled to purchase upon exercise of
this Warrant shall be increased or decreased, as the case may be, in direct
proportion to the increase or decrease in the number of shares of Common Stock
by reason of such stock split, recapitalization, reclassification or similar
transaction, and the Exercise Price shall be, in the case of an increase in the
number of shares, proportionally decreased and, in the case of decrease in the
number of shares, proportionally increased. The Company shall give the Warrant
Holder the same notice at the same time it provides such notice to
-6-
<PAGE> 7
holders of Common Stock of any transaction described in this Section 7(b).
(c) Distributions. If the Company shall at any time distribute to
holders of Common Stock cash, evidences of indebtedness or other securities or
assets (other than cash dividends or distributions payable out of earned surplus
or net profits for the current or the immediately preceding year) then, in any
such case, the Holder of this Warrant shall be entitled to receive, upon
exercise of this Warrant, with respect to each share of Common Stock issuable
upon such exercise, the amount of cash or evidences of indebtedness or other
securities or assets which the Holder would have been entitled to receive with
respect to each such share of Common Stock as a result of the happening of such
event had this Warrant been exercised immediately prior to the record date or
other date fixing shareholders to be affected by such event (the "Determination
Date") or, in lieu thereof, if the Board of Directors of the Company should so
determine prior to the Determination Date, a reduced Exercise Price determined
by multiplying the Exercise Price on the Determination Date by a fraction, the
numerator of which is the difference between (x) such Exercise Price and (y) the
value of such distribution applicable to one share of Common Stock (such value
to be determined by an investment bank selected by the Holder and reasonably
acceptable to the Company), and the denominator of which is such Exercise Price.
(d) Notice of Consolidation or Merger. In the event of a merger,
consolidation, business combination, tender offer, exchange of shares,
recapitalization, reorganization, redemption or other similar event, as a result
of which shares of Common Stock of the Company shall be changed into the same or
a different number of shares of the same or another class or classes of stock or
securities or other assets of the Company or another entity or there is a sale
of all or substantially all the Company's assets (a "Corporate Change"), then
this Warrant shall be exercisable into such class and type of securities or
other assets as the Holder would have received had the Holder exercised this
Warrant immediately prior to such Corporate Change; provided, however, that
Company may not effect any Corporate Change unless (i) it first shall have given
twenty (20) business days' notice to the Holder hereof of any Corporate Change
and makes a public announcement of such event at the same time that it gives
such notice (it being understood that the filing by the Company of a Form 8-K
for the purpose of disclosing the anticipated consummation of the Corporate
Change shall constitute such a notice for purposes of this provision) and (ii)
it requires the resulting successor or acquiring entity (if not the Company) to
assume by written instrument the obligations of the Company hereunder and under
the Securities Purchase Agreement and the Registration Rights Agreement.
(e) Exercise Price as Adjusted. As used in this Warrant, the term
"Exercise Price" shall mean the purchase price per share specified in paragraph
1 of this Warrant, until the occurrence of an event stated in subsection (a),
(b) or (c) of this paragraph 7, and thereafter shall mean said price as adjusted
from time to time in accordance with the provisions of each such subsection. No
such adjustment under this paragraph 6 shall be made unless such adjustment
would change the Exercise Price at the time by two percent (2%) or more;
provided, however, that all adjustments not so made shall be deferred and made
when the aggregate thereof would change the Exercise Price at the time by
-7-
<PAGE> 8
$.01 or more. No adjustment made pursuant to any provision of this paragraph 7
shall have the effect of increasing the total consideration payable upon
exercise of this Warrant in respect of all the Common Stock as to which this
Warrant may be exercised.
(f) Adjustments: Additional Shares, Securities or Assets. In the event
that at any time, as a result of an adjustment made pursuant to this paragraph
7, the Holder of this Warrant shall, upon exercise of this Warrant, become
entitled to receive securities or assets (other than Common Stock) then,
wherever appropriate, all references herein to shares of Common Stock shall be
deemed to refer to and include such shares and/or other securities or assets;
and thereafter the number of such shares and/or other securities or assets shall
be subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this paragraph 7.
8. Fractional Interests.
No fractional shares or scrip representing fractional shares
shall be issuable upon the exercise of this Warrant, but on exercise of this
Warrant, the Holder hereof may purchase only a whole number of shares of Common
Stock. If, on exercise of this Warrant, the Holder hereof would be entitled to a
fractional share of Common Stock or a right to acquire a fractional share of
Common Stock, such fractional share shall be disregarded and the number of
shares of Common Stock issuable upon exercise shall be rounded up or down to the
nearest whole number of shares of Common Stock.
9. Transfer of this Warrant. The Holder may sell, transfer, assign,
pledge or otherwise dispose of this Warrant, in whole or in part, as long as
such sale or other disposition is made pursuant to pursuant to an effective
registration statement or an exemption to the registration requirements of the
Securities Act of 1933, as amended, and applicable state laws. Upon such
transfer or other disposition, the Holder shall deliver a written notice to
Company, substantially in the form of the Transfer Notice attached hereto as
Exhibit B (the "Transfer Notice"), indicating the person or persons to whom this
Warrant shall be transferred and, if less than all of this Warrant is
transferred or this Warrant is transferred in parts, the number of Warrant
Shares to be covered by the part of this Warrant to be transferred to each such
person. Within three (3) business days of receiving a Transfer Notice and the
original of this Warrant, the Company shall deliver to the each transferee
designated by the Holder a Warrant or Warrants of like tenor and terms for the
appropriate number of Warrant Shares.
10. Benefits of this Warrant.
Nothing in this Warrant shall be construed to confer upon any
person other than the Holder of this Warrant any legal or equitable right,
remedy or claim under this Warrant and this Warrant shall be for the sole and
exclusive benefit of the Holder of this Warrant.
11. Loss, theft, destruction or mutilation of Warrant.
-8-
<PAGE> 9
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the Company,
and upon surrender of this Warrant, if mutilated, the Company shall execute and
deliver a new Warrant of like tenor and date.
12. Notice or Demands.
Except as otherwise provided herein, any notice, demand or
request required or permitted to be given pursuant to the terms of this Warrant
shall be in writing and shall be deemed given (i) when delivered personally or
by verifiable facsimile transmission (with an original to follow) on or before
5:00 p.m., eastern time, on a business day or, if such day is not a business
day, on the next succeeding business day, (ii) on the next business day after
timely delivery to a nationally-recognized overnight courier and (iii) on the
Business Day actually received if deposited in the U.S. mail (certified or
registered mail, return receipt requested, postage prepaid), addressed as
follows:
If to the Company:
Shared Technologies Cellular, Inc.
100 Great Meadow Road
Suite 100
Wethersfield, CT 06109
Attn: Legal Department
Tel: (860) 258-2500
Fax: (860) 258-2455
with a copy to:
Day, Berry & Howard LLP
260 Franklin Street
Boston MA 02110
Attn: Jeffrey A. Clopeck, Esq.
Tel: (617) 345-4600
Fax: (617) 345-4745
and if to the Holder, to such address as shall be designated by the Holder in
writing to the Company.
13. Applicable Law.
This Warrant is issued under and shall for all purposes be
governed by and construed in accordance with the laws of the state of New York,
without giving effect to conflict of law provisions thereof.
-9-
<PAGE> 10
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the
___ day of February, 1999.
Shared Technologies Cellular, Inc.
By:
Name:
Title:
-10-
<PAGE> 11
EXHIBIT A to WARRANT
EXERCISE NOTICE
The undersigned Holder hereby irrevocably exercises the right to
purchase of the shares of Common Stock ("Warrant Shares") of Shared Technologies
Cellular, Inc., a Delaware corporation (the "Company"), evidenced by the
attached Warrant (the "Warrant"). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.
1. Form of Exercise Price. The Holder intends that payment of the
Exercise Price shall be made as:
______ a Cash Exercise with respect to _________________ Warrant Shares; and/or
______ a Cashless Exercise with respect to _________________ Warrant Shares.
2. Payment of Exercise Price. In the event that the Holder has elected
a Cash Exercise with respect to some or all of the Warrant Shares to be issued
pursuant hereto, the Holder shall pay the sum of $________________ to the
Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the Holder
_____________ Warrant Shares in accordance with the terms of the Warrant.
Date: ______________________________
____________________________________
Name of Registered Holder
By: _______________________________
Name:
Title:
-11-
<PAGE> 12
EXHIBIT B to WARRANT
TRANSFER NOTICE
FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells,
assigns and transfers unto the person or persons named below the right to
purchase shares of the Common Stock of Shared Technologies Cellular, Inc.
evidenced by the attached Warrant.
Date: ______________________________
____________________________________
Name of Registered Holder
By: _______________________________
Name:
Title:
Transferee Name and Address:
___________________________________
___________________________________
___________________________________
-12-
<PAGE> 13
SCHEDULE OF WARRANTS
<TABLE>
<CAPTION>
Name Number of Warrants
- ---- ------------------
<S> <C>
Marcuard Cook & Cie S.A. 34,000
Eagle & Dominion Euro American Growth Fund Ltd. 4,400
Eagle & Dominion Euro American Growth Fund L.P. 1,200
Meinl Bank AG 21,000
Trower FT Fund 1,000
AAGC ABN AMRO Bank NV 20,000
Lupton Estates Limited 16,000
Dulville Limited 16,000
Grange Nominees Limited 8,400
NCL Investments Limited a/c NCL (Nominees) 8,000
Thornhill Investment Management Limited Account C 3,660
Thornhill Investment Management Limited Account B 340
Oakes Fitzwilliams & Company S.A. 6,820
Oakes Fitzwilliams & Company Ltd. 3,000
Trident North Atlantic Fund 1,400
Bellhaven Investments Ltd. 560
Adam & Co. (Nominees) Ltd. E&D No. 2 Account 400
Pequot Scout Fund, L.P. 28,820
International Capital Partners Profit-Sharing Trust 5,000
Ardara Investment Inc. 20,000
Marshall Capital Management, Inc. 100,000
-------
300,000
</TABLE>
