SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Amendment No.1
on
Form 10-Q/A
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996.
OR
(_) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 0-26684
GLOBAL INTELLICOM, INC.
--------------------------------------
(Exact name of registrant as specified in its charter.)
Nevada 13-3797104
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
747 Third Avenue
New York, New York 10017
-------------------------------------- -----
(Address of principal executive offices) (Zip code)
(212)750-3772
--------------------------
Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such report(s), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
As of November 15, 1996, there were outstanding 4,404,313 shares of
Global Intellicom, Inc.'s common stock, par value $0.1 per share (the "Common
Stock").
<PAGE>
INTRODUCTION
- ------------
The purpose of this amendment is to revise the list of Exhibits set
forth in Item 6 of Part II of the previously filed Form 10-Q for the quarter
ended September 30, 1996 and to file the Exhibits that were not filed therewith.
PART II OTHER INFORMATION
Item 6
- ------
(a) Exhibits
--------
(3)(i)(a) Certificate of Designation with respect to the Company's Series 1
Convertible Preferred Stock, filed with the Nevada Secretary of
State on September 10, 1996
(3)(i)(b) Amendment to the Certificate of Designation with respect to the
Company's Series 1 Convertible Preferred Stock, filed with the
Nevada Secretary of State on October 15, 1996.
(3)(i)(c) Certificate of Designation with respect to the Company's Series 2
Convertible Preferred Stock, filed with the Nevada Secretary of
State on October 25, 1996.
(3)(i)(d) Certificate of Designation with respect to the Company's Series 3
Convertible Preferred Stock, filed with the Nevada Secretary of
State on September 12, 1996.
(3)(i)(e) Certificate of Designation with respect to the Company's Series 4
Convertible Preferred Stock, filed with the Nevada Secretary of
State on October 25, 1996.
(4)(i) Form of Regulation S Securities Subscription Agreement, pursuant
to which the Company sold 300,000 shares of Series 1 Convertible
Preferred Stock.
(4)(ii) Form of Offshore Securities Subscription Agreement, pursuant to
which the Company sold 425 shares of Series 2 Convertible
Preferred Stock.
(4)(iii) Form of Regulation S Securities Subscription Agreement, pursuant
to which the Company sold 25,000 shares of Series 4 Convertible
Preferred Stock.
(10)(i)* Asset Purchase Agreement dated as of September 16, 1996, between
the Company, the Company's wholly-owned subsidiary,
Global-InSync, Inc. ("InSync"), ManTech Solutions Corporation
("MSOL"), and MSOL's parent, ManTech International Corporation
("ManTech"), pursuant to which InSync purchased substantially all
of the assets of MSOL.
(10)(ii) Asset Purchase Agreement dated as of October 18, 1996, between
the Company, the Company's wholly-owned subsidiary, Speech
Solutions, Inc. (formerly known as ProNotes Acquisition Corp.,
"SSI"), Pro Notes, Inc. ("PNI") and Alan Costilo, pursuant to
which SSI purchased substantially all of the assets of PNI.
(27) Financial Data Schedule.
(b) Reports on Form 8-K
-------------------
On October 1, 1996, the Company filed a current report on Form 8-K,
reporting Item 2, Acquisition or Disposition of Assets, describing the Company's
purchase of substantially all the assets of ManTech Solutions Corporation. The
Company will file the required financial information by November 29, 1996.
- -----------------
* Incorporated by reference from the Company's report on Form 8-K, filed on
October 1, 1996
-2-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Date: November 19, 1996 GLOBAL INTELLICOM, INC.
By /s/ Anthony R. Cucchi
------------------------
Anthony R. Cucchi
President
By:/s/ William C. Kaltnecker
------------------------
William C. Kaltnecker
Vice President and Controller
CERTIFICATE OF DESIGNATION
N. Norman Muller and Johan de Muinck Keizer, certify that they are
the Chairman and Secretary, respectively, of Global Intellicom, Inc., a Nevada
corporation (hereinafter referred to as the "Corporation" or the "Company");
that, pursuant to the Corporation's Articles of Incorporation, as amended, and
Section 78.195 of the Nevada General Corporation Law, the Board of Directors of
the Corporation adopted the following resolutions on August 27, 1996; and that
none of the Series 1 Convertible Preferred Stock has been issued.
1. Creation of Series 1 Convertible Preferred Stock. There is hereby
created a series of preferred stock consisting of 330,000 shares and designated
as the Series 1 Convertible Preferred Stock, having the voting powers,
preferences, relative, participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set forth below.
2. Dividend Provisions. The holders of shares of Series 1 Convertible
Preferred Stocks shall be entitled to receive, when and as declared by the Board
of Directors out of any funds at the time legally available therefor, dividends
at a par with holders of Common Stock as if the Series 1 Convertible Preferred
Stock has been converted into Common Stock on the record date for the payment of
dividend. Dividends shall be waived with respect to any shares of Series 1
Preferred Stock which are converted prior to any dividend payment date. Each
share of Series 1 Convertible Preferred Stock shall rank on a parity with each
other share of Series 1 Convertible Preferred Stock with respect to dividends.
3. Redemption Provisions. Except as otherwise expressly provided or
required by law, the Series 1 Convertible Preferred Stock may not be redeemed.
4. Liquidation Provisions. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the Series 1 Convertible Preferred Stock shall be entitled to receive an amount
equal to $10.00 per share. After the full preferential liquidation amount has
been paid to, or determined and set apart for, all other series of Preferred
Stock hereafter authorized and issued, if any, the remaining assets of the
Corporation available for distribution to shareholders shall be paid to the
common stock, which amount shall be distributed ratably to the holders of the
common stock. In the event the assets of the Corporation available for
distribution to its shareholders are insufficient to pay the full preferential
liquidation amount per share required to be paid the Corporation's Series 1
Convertible Preferred Stock, the entire amount of assets of the Corporation
available for distribution to shareholders shall be paid up to their respective
full liquidation amounts first to the Series 1 Convertible Preferred Stock, then
to any other series of Preferred Stock hereafter authorized and issued, all of
which amounts shall be distributed ratably among holders of each such series of
Preferred Stock, and the common stock shall receive nothing. A reorganization or
any other consolidation or merger of the Corporation with or into any other
corporation, or any other sale of all or substantially all of the assets of the
Corporation, shall not be deemed to be a liquidation, dissolution or winding up
of the Corporation within the meaning of this Section 4, and the Series 1
Convertible Preferred Stock shall be entitled only to (i) the right provided in
any agreement or plan governing the reorganization or other consolidation,
merger or sale of assets transaction, (ii) the rights contained in the Nevada
General Corporation Law and (iii) the rights contained in other Sections hereof.
<PAGE>
5. Conversion Provisions. The holders of shares of Series 1
Convertible Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
(a) Right to Convert.
(1) Each share of Series 1 Convertible
Preferred Stock (the "Preferred Shares") shall be
convertible, at the option of its holder, at any time
after October 11, 1996, into a number of shares of common
stock of the Company at the initial conversion rate (the
"Conversion Rate") defined below.
The initial Conversion Rate, subject to the
adjustments described below, shall be a number of shares
of common stock (rounded to the nearest whole number)
equal to $10.00 divided by the lower of (i) Seventy
Percent (70%) of the Market Price of the common stock or
$3.50. For purposes of this Section 5(a)(1), Market Price
shall be the closing bid price of the common stock on the
Conversion Date, as reported in the Wall Street Journal,
as reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ"), or the
closing bid price in the over-the-counter market if other
than NASDAQ, averaged over the five trading days prior to
the date of conversion.
Such conversion shall be effectuated by
surrendering the Preferred Shares to be converted (with a
copy, by facsimile or courier, to the Company) to the
Company's registrar and transfer agent ("Transfer Agent"),
with the form of conversion notice attached hereto as
Exhibit A, executed by the holder of the Preferred
Share(s) evidencing such holder's intention to convert
these Preferred Share(s) or a specified portion (as above
provided) hereof, and accompanied, if required by the
Company, by proper assignment hereof in blank. The date on
which notice of conversion (the "Conversion Date") is
given shall be the date on which the holder has delivered
to the Transfer Agent, by facsimile or had delivery, of
its intent to convert duly executed, the Company shall
cause the Transfer Agent to complete the issuance of
Common Shares within two (2) business days of receipt of
such conversion form, provided that it has received the
Series 1 Convertible Preferred Stock certificates which
are the subject of the conversion.
(2) No less than 2,500 (or multiple thereof)
shares of Series 1 Convertible Preferred Stock may be
converted at any one time. No fractional shares of common
stock shall be issued upon conversion of the Series 1
Convertible Preferred Stock, in lieu of fractional shares,
the number of shares issuable will be rounded to the
nearest whole share.
(b) Adjustments to Conversion Rate.
(1) Reclassification, Exchange and
Substitution. If the common stock issuable on conversion
of the Series 1 Convertible Preferred Stock shall be
changed into the same or a different number of shares of
any other class or classes of stock, whether by capital
reorganization, reclassification, or otherwise (other
2
<PAGE>
than a subdivision or combination of shares provided for
above), the holders of the Series 1 Convertible Preferred
Stock shall, upon its conversion, be entitled to receive,
in lieu of the common stock which the holders would have
become entitled to receive but for such change, a number
of shares of such other class or classes of stock that
would have been subject to receipt by the holders if they
had exercised their rights of conversion of the Series 1
Convertible Preferred Stock immediately before that
change.
(2) Reorganizations, Mergers, Consolidations or
Sale of Assets. If at any time there shall be a capital
reorganization of the Corporation's common stock (other
than a subdivision, combination, reclassification or
exchange of shares provided for elsewhere in this Section
(b) or merger of the Corporation into another corporation,
or the sale of the Corporation's properties and assets as,
or substantially as, an entirety to any other person),
then, as a part of such reorganization, merger or sale,
lawful provision shall be made so that the holders of the
Series 1 Convertible Preferred Stock shall thereafter be
entitled to receive upon conversion of the Series 1
Convertible Preferred Stock, the number of shares of stock
or other securities or property of the Corporation, or of
the successor corporation resulting from such merger, to
which holders of the common stock deliverable upon
conversion of the Series 1 Convertible Preferred Stock
would have been entitled on such capital reorganization,
merger or sale if the Series 1 Convertible Preferred Stock
had been converted immediately before that capital
reorganization, merger or sale to the end that the
provisions of this paragraph (b)(3) (including adjustment
of the Conversion Rate then in effect and number of shares
purchasable upon conversion of the Series 1 Convertible
Preferred Stock) shall be applicable after that event as
nearly equivalently as may be practicable.
(c) No Impairment. The Corporation will not, by
amendment of its Certificate of Incorporation or through
any reorganization, recapitalization, transfer of assets,
merger, dissolution, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in
the carrying out of all the provision of this Section 6
and in the taking of all such action as may be necessary
or appropriate in order to protect the Conversion Rights
of the holders of the Series 1 Convertible Preferred Stock
against impairment.
(d) Certificate as to Adjustments. Upon the
occurrence of each adjustment or readjustment of the
Conversion Rate for any shares of Series 1 Convertible
Preferred Stock, the Corporation at its expense shall
promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish
to each holder of Series 1 Convertible Preferred Stock
effected thereby a certificate setting forth such
adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of
any holder of Series 1 Convertible Preferred Stock,
furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Rate at the time in
effect, and (iii) the number of shares of common stock and
the amount, if any, of other property which at the time
would be received upon the
3
<PAGE>
conversion of such holder's shares of Series 1 Convertible
Preferred Stock.
(e) Notices of Record Date. In the event of the
establishment by the Corporation of a record of the
holders of any class of securities for the purpose of
determining the holders thereof who are entitled to
receive any dividend (other than a cash dividend) or other
distribution, the Corporation shall mail to each holder of
Series 1 Preferred Stock at least twenty (20) days prior
to the date specified therein, a notice specifying the
date on which any such record is to be taken for the
purpose of such dividend or distribution and the amount
and character of such dividend or distribution.
(f) Reservation of Stock Issuable Upon
Conversion. The Corporation shall at all times reserve and
keep available out of its authorized but unissued shares
of common stock solely for the purpose of effecting the
conversion of the shares of the Series 1 Convertible
Preferred Stock such number of its shares of common stock
as shall from time to time be sufficient to effect the
conversion of all then outstanding shares of the Series 1
Preferred Stock; and if at any time the number of
authorized but unissued shares of common stock shall not
be sufficient to effect the conversion of all then
outstanding shares of the Preferred Stock, the Corporation
will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but
unissued shares of common stock to such number of shares
as shall be sufficient for such purpose.
(g) Notices. Any notices required by the
provisions of this Paragraph (e) to be given to the
holders of shares of Series 1 Convertible Preferred Stock
shall be deemed given if deposited in the United States
mail, postage prepaid, and addressed to each holder of
record at its address appearing on the books of the
Corporation.
6. Voting Provisions. Except as otherwise expressly provided or
required by law, the Series 1 Convertible Preferred Stock shall have no voting
rights.
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designation of Series 1 Convertible Preferred Stock to be duly executed by its
President and attested to by its Secretary this _____ day of August, 1996.
/s/ N. Norman Muller
-----------------------------
N. Norman Muller
/s/ Johan de Muinck Keizer
-----------------------------
Johan de Muinck Keizer
4
<PAGE>
STATE OF NEW YORK }
} ss.
COUNTY OF NEW YORK }
On August __, 1996, before me, ___________________, a notary public
in and for said state, personally appeared N. Norman Muller and Johan de Muinck
Keizer, personally known to me to be the persons whose names are subscribed to
the within instrument and acknowledged to me that they executed the same in
their authorized capacities, and that by their signatures on the instrument the
entity upon behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
Signature ________________________ (Seal)
5
AMENDMENT
TO THE
CERTIFICATE OF DESIGNATION
Anthony R. Cucchi and Johan de Muinck Keizer, certify that they are
the President and Secretary, respectively, of Global Intellicom, Inc., a Nevada
corporation (hereinafter referred to as the "Corporation" or the "Company");
that, pursuant to the Corporation's Articles of Incorporation, as amended, and
Section 78.195 of the Nevada General Corporation Law, the Board of Directors of
the Corporation adopted the following resolutions on August 27, 1996; and that
none of the Series 1 Convertible Preferred Stock has been issued.
Articles 1, 5 and 6 should be amended as follows:
1. Creation of Series 1 Convertible Preferred Stock. There is hereby
created a series of preferred stock consisting of 330,000 shares and designated
as the Series 1 Convertible Preferred Stock, having the voting powers,
preferences, relative, participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set forth below.
5. Conversion Provisions. The holders of shares of Series 1
Convertible Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
(a) Right to Convert.
(1) Each share of Series 1 Convertible Preferred Stock
(the "Preferred Shares") shall be convertible, at the option of its
holder, at any time after October 11, 1996, into a number of shares
of common stock of the Company at the initial conversion rate (the
"Conversion Rate") defined below.
The initial Conversion Rate, subject to the adjustments
described below, shall be a number of shares of common stock (rounded
to the nearest whole number) equal to $10.00 divided by the lower of
(i) Seventy Percent (70%) of the Market Price of the common stock or
$3.50. For purposes of this Section 5(a)(1), Market Price shall be
the closing bid price of the common stock on the Conversion Date, as
reported in the Wall Street Journal, as reported by the National
Association of Securities Dealers Automated Quotation System
("NASDAQ"), or the closing bid price in the over-the-counter market
if other than NASDAQ, averaged over the five trading days prior to
the date of conversion.
Such conversion shall be effectuated by surrendering the
Preferred Shares to be converted (with a copy, by facsimile or
courier, to the Company) to the Company's registrar and transfer
agent ("Transfer Agent"), with the form of conversion notice attached
hereto as Exhibit A, executed by the holder of the Preferred Share(s)
evidencing such holder's intention to convert these Preferred
Share(s) or a specified portion (as above provided) hereof, and
accompanied, if required by the Company, by proper assignment hereof
in blank. The date on which notice of conversion (the "Conversion
Date") is given shall be the date on which the holder has delivered
to the Transfer Agent, by facsimile or hand
<PAGE>
delivery, of its intent to convert duly executed to the Transfer
Agent. The Company shall cause the Transfer Agent to complete the
issuance of Common Shares within two (2) business days of receipt of
such conversion form, provided that the Company or its agent has
received the Series 1 Convertible Preferred Stock certificates which
are the subject of the conversion.
(2) No less than 2,500 (or multiple thereof) shares of
Series 1 Convertible Preferred Stock may be converted at any one
time. No fractional shares of common stock shall be issued upon
conversion of the Series 1 Convertible Preferred Stock, in lieu of
fractional shares, the number of shares issuable will be rounded to
the nearest whole share.
(b) Adjustments to Conversion Rate.
(1) Reclassification, Exchange and Substitution. If the
common stock issuable on conversion of the Series 1 Convertible
Preferred Stock shall be changed into the same or a different number
of shares of any other class or classes of stock, whether by capital
reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares provided for above), the holders
of the Series 1 Convertible Preferred Stock shall, upon its
conversion, be entitled to receive, in lieu of the common stock which
the holders would have become entitled to receive but for such
change, a number of shares of such other class or classes of stock
that would have been subject to receipt by the holders if they had
exercised their rights of conversion of the Series 1 Convertible
Preferred Stock immediately before that change.
(2) Reorganizations, Mergers, Consolidations or Sale of
Assets. If at any time there shall be a capital reorganization of the
Corporation's common stock (other than a subdivision, combination,
reclassification or exchange of shares provided for elsewhere in this
Section (b) or merger of the Corporation into another corporation, or
the sale of the Corporation's properties and assets as, or
substantially as, an entirety to any other person), then, as a part
of such reorganization, merger or sale, lawful provision shall be
made so that the holders of the Series 1 Convertible Preferred Stock
shall thereafter be entitled to receive upon conversion of the Series
1 Convertible Preferred Stock, the number of shares of stock or other
securities or property of the Corporation, or of the successor
corporation resulting from such merger, to which holders of the
common stock deliverable upon conversion of the Series 1 Convertible
Preferred Stock would have been entitled on such capital
reorganization, merger or sale if the Series 1 Convertible Preferred
Stock had been converted immediately before that capital
reorganization, merger or sale to the end that the provisions of this
paragraph (b)(3) (including adjustment of the Conversion Rate then in
effect and number of shares purchasable upon conversion of the Series
1 Convertible Preferred Stock) shall be applicable after that event
as nearly equivalently as may be practicable.
2
<PAGE>
(c) No Impairment. The Corporation will not, by amendment
of its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, merger, dissolution, or any
other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder
by the Corporation, but will at all times in good faith assist in the
carrying out of all the provision of this Section 6 and in the taking
of all such action as may be necessary or appropriate in order to
protect the Conversion Rights of the holders of the Series 1
Convertible Preferred Stock against impairment.
(d) Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Conversion Rate for any shares
of Series 1 Convertible Preferred Stock, the Corporation at its
expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to each
holder of Series 1 Convertible Preferred Stock effected thereby a
certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is
based. The Corporation shall, upon the written request at any time of
any holder of Series 1 Convertible Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (i)
such adjustments and readjustments, (ii) the Conversion Rate at the
time in effect, and (iii) the number of shares of common stock and
the amount, if any, of other property which at the time would be
received upon the conversion of such holder's shares of Series 1
Convertible Preferred Stock.
(e) Notices of Record Date. In the event of the
establishment by the Corporation of a record of the holders of any
class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a cash
dividend) or other distribution, the Corporation shall mail to each
holder of Series 1 Preferred Stock at least twenty (20) days prior to
the date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend or
distribution and the amount and character of such dividend or
distribution.
(f) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of common stock solely for the purpose
of effecting the conversion of the shares of the Series 1 Convertible
Preferred Stock such number of its shares of common stock as shall
from time to time be sufficient to effect the conversion of all then
outstanding shares of the Series 1 Preferred Stock; and if at any
time the number of authorized but unissued shares of common stock
shall not be sufficient to effect the conversion of all then
outstanding shares of the Preferred Stock, the Corporation will take
such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of common
stock to such number of shares as shall be sufficient for such
purpose.
(g) Notices. Any notices required by the provisions of this
Paragraph (e) to be given to the holders of shares of Series 1
Convertible Preferred Stock shall be deemed given if deposited in the
United States mail, postage prepaid, and addressed to each holder of
record at its address appearing on the books of the Corporation.
6. Voting Provisions. Except as otherwise expressly provided or
required by law, the Series 1 Convertible Preferred Stock shall have no voting
rights.
3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Amendment to the
Certificate of Designation of Series 1 Convertible Preferred Stock to be duly
executed by its President and attested to by its Secretary this 1st day of
October, 1996.
/s/ Anthony R. Cucchi
--------------------------
Anthony R. Cucchi
/s/ Johan de Muinck Keizer
--------------------------
Johan de Muinck Keizer
4
<PAGE>
STATE OF NEW YORK }
} ss.
COUNTY OF NEW YORK }
On October __, 1996, before me, ___________________, a notary public
in and for said state, personally appeared Anthony R. Cucchi and Johan de Muinck
Keizer, personally known to me to be the persons whose names are subscribed to
the within instrument and acknowledged to me that they executed the same in
their authorized capacities, and that by their signatures on the instrument the
entity upon behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
Signature ________________________ (Seal)
5
CERTIFICATE OF DESIGNATION
N. Norman Muller and Johan de Muinck Keizer, certify that they are
the Chairman and Secretary, respectively, of Global Intellicom, Inc., a Nevada
corporation (hereinafter referred to as the "Corporation" or the "Company");
that, pursuant to the Corporation's Articles of Incorporation, as amended, and
Section 78.195 of the Nevada General Corporation Law, the Board of Directors of
the Corporation adopted the following resolutions on August 27, 1996; and that
none of the Series 2 Convertible Preferred Stock has been issued.
1. Creation of Series 2 Convertible Preferred Stock. There is hereby
created a series of preferred stock consisting of 825 shares and designated as
the Series 2 Convertible Preferred Stock, having the voting powers, preferences,
relative, participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set forth below.
2. Dividend Provisions. The holders of shares of Series 2 Convertible
Preferred Stocks shall be entitled to receive, when and as declared by the Board
of Directors out of any funds at the time legally available therefor, dividends
at a par with holders of Common Stock as if the Series 2 Convertible Preferred
Stock has been converted into Common Stock on the record date for the payment of
dividend. Dividends shall be waived with respect to any shares of Series 2
Preferred Stock which are converted prior to any dividend payment date. Each
share of Series 2 Convertible Preferred Stock shall rank on a parity with each
other share of Series 2 Convertible Preferred Stock with respect to dividends.
3. Redemption Provisions. Except as otherwise expressly provided or
required by law, the Series 2 Convertible Preferred Stock may not be redeemed.
4. Liquidation Provisions. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the Series 2 Convertible Preferred Stock shall be entitled to receive an amount
equal to $1,000.00 per share. After the full preferential liquidation amount has
been paid to, or determined and set apart for, all other series of Preferred
Stock hereafter authorized and issued, if any, the remaining assets of the
Corporation available for distribution to shareholders shall be paid to the
common stock, which amount shall be distributed ratably to the holders of the
common stock. In the event the assets of the Corporation available for
distribution to its shareholders are insufficient to pay the full preferential
liquidation amount per share required to be paid the Corporation's Series 2
Convertible Preferred Stock, the entire amount of assets of the Corporation
available for distribution to shareholders shall be paid up to their respective
full liquidation amounts first to the Series 2 Convertible Preferred Stock, then
to any other series of Preferred Stock hereafter authorized and issued, all of
which amounts shall be distributed ratably among holders of each such series of
Preferred Stock, and the common stock shall receive nothing. A reorganization or
any other consolidation or merger of the Corporation with or into any other
corporation, or any other sale of all or substantially all of the assets of the
Corporation, shall not be deemed to be a liquidation, dissolution or winding up
of the Corporation within the meaning of this Section 4, and the Series 2
Convertible Preferred Stock shall be entitled only to (i) the right provided in
any agreement or plan governing the reorganization or other consolidation,
merger or sale of assets transaction, (ii) the rights contained in the Nevada
General Corporation Law and (iii) the rights contained in other Sections hereof.
<PAGE>
5. Conversion Provisions. The holders of shares of Series 2
Convertible Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
(a) Right to Convert.
(1) Each share of Series 2 Convertible
Preferred Stock (the "Preferred Shares") shall be
convertible, at the option of its holder, at any time
after October 14, 1996, into a number of shares of common
stock of the Company at the initial conversion rate (the
"Conversion Rate") defined below.
The initial Conversion Rate, subject to the
adjustments described below, shall be a number of shares
of common stock (rounded to the nearest whole number)
equal to $1,000.00 divided by the lower of (i) Sixty Five
Percent (65%) of the Market Price of the common stock or
$4.03125. For purposes of this Section 5(a)(1), Market
Price shall be the closing bid price of the common stock
on the Conversion Date, as reported in the Wall Street
Journal, as reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"),
or the closing bid price in the over-the-counter market if
other than NASDAQ, averaged over the five trading days
prior to the date of conversion.
Such conversion shall be effectuated by
surrendering the Preferred Shares to be converted (with a
copy, by facsimile or courier, to the Company) to the
Company's registrar and transfer agent ("Transfer Agent"),
with the form of conversion notice attached hereto as
Exhibit A, executed by the holder of the Preferred
Share(s) evidencing such holder's intention to convert
these Preferred Share(s) or a specified portion (as above
provided) hereof, and accompanied, if required by the
Company, by proper assignment hereof in blank. The date on
which notice of conversion (the "Conversion Date") is
given shall be the date on which the holder has delivered
to the Transfer Agent, by facsimile or had delivery, of
its intent to convert duly executed, the Company shall
cause the Transfer Agent to complete the issuance of
Common Shares within two (2) business days of receipt of
such conversion form, provided that it has received the
Series 2 Convertible Preferred Stock certificates which
are the subject of the conversion.
(2) No less than 2,500 (or multiple thereof)
shares of Series 2 Convertible Preferred Stock may be
converted at any one time. No fractional shares of common
stock shall be issued upon conversion of the Series 2
Convertible Preferred Stock, in lieu of fractional shares,
the number of shares issuable will be rounded to the
nearest whole share.
(b) Adjustments to Conversion Rate.
(1) Reclassification, Exchange and
Substitution. If the common stock issuable on conversion
of the Series 2 Convertible Preferred Stock shall be
changed into the same or a different number of shares of
any other class or classes of stock, whether by capital
reorganization, reclassification, or otherwise (other
2
<PAGE>
than a subdivision or combination of shares provided for
above), the holders of the Series 2 Convertible Preferred
Stock shall, upon its conversion, be entitled to receive,
in lieu of the common stock which the holders would have
become entitled to receive but for such change, a number
of shares of such other class or classes of stock that
would have been subject to receipt by the holders if they
had exercised their rights of conversion of the Series 2
Convertible Preferred Stock immediately before that
change.
(2) Reorganizations, Mergers, Consolidations or
Sale of Assets. If at any time there shall be a capital
reorganization of the Corporation's common stock (other
than a subdivision, combination, reclassification or
exchange of shares provided for elsewhere in this Section
(b) or merger of the Corporation into another corporation,
or the sale of the Corporation's properties and assets as,
or substantially as, an entirety to any other person),
then, as a part of such reorganization, merger or sale,
lawful provision shall be made so that the holders of the
Series 2 Convertible Preferred Stock shall thereafter be
entitled to receive upon conversion of the Series 2
Convertible Preferred Stock, the number of shares of stock
or other securities or property of the Corporation, or of
the successor corporation resulting from such merger, to
which holders of the common stock deliverable upon
conversion of the Series 2 Convertible Preferred Stock
would have been entitled on such capital reorganization,
merger or sale if the Series 2 Convertible Preferred Stock
had been converted immediately before that capital
reorganization, merger or sale to the end that the
provisions of this paragraph (b)(3) (including adjustment
of the Conversion Rate then in effect and number of shares
purchasable upon conversion of the Series 2 Convertible
Preferred Stock) shall be applicable after that event as
nearly equivalently as may be practicable.
(c) No Impairment. The Corporation will not, by
amendment of its Certificate of Incorporation or through
any reorganization, recapitalization, transfer of assets,
merger, dissolution, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in
the carrying out of all the provision of this Section 6
and in the taking of all such action as may be necessary
or appropriate in order to protect the Conversion Rights
of the holders of the Series 2 Convertible Preferred Stock
against impairment.
(d) Certificate as to Adjustments. Upon the
occurrence of each adjustment or readjustment of the
Conversion Rate for any shares of Series 2 Convertible
Preferred Stock, the Corporation at its expense shall
promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish
to each holder of Series 2 Convertible Preferred Stock
effected thereby a certificate setting forth such
adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of
any holder of Series 2 Convertible Preferred Stock,
furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Rate at the time in
effect, and (iii) the number of shares of common stock and
the amount, if any, of other property which at the time
would be received upon the
3
<PAGE>
conversion of such holder's shares of Series 2 Convertible
Preferred Stock.
(e) Notices of Record Date. In the event of the
establishment by the Corporation of a record of the
holders of any class of securities for the purpose of
determining the holders thereof who are entitled to
receive any dividend (other than a cash dividend) or other
distribution, the Corporation shall mail to each holder of
Series 2 Preferred Stock at least twenty (20) days prior
to the date specified therein, a notice specifying the
date on which any such record is to be taken for the
purpose of such dividend or distribution and the amount
and character of such dividend or distribution.
(f) Reservation of Stock Issuable Upon
Conversion. The Corporation shall at all times reserve and
keep available out of its authorized but unissued shares
of common stock solely for the purpose of effecting the
conversion of the shares of the Series 2 Convertible
Preferred Stock such number of its shares of common stock
as shall from time to time be sufficient to effect the
conversion of all then outstanding shares of the Series 2
Preferred Stock; and if at any time the number of
authorized but unissued shares of common stock shall not
be sufficient to effect the conversion of all then
outstanding shares of the Preferred Stock, the Corporation
will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but
unissued shares of common stock to such number of shares
as shall be sufficient for such purpose.
(g) Notices. Any notices required by the
provisions of this Paragraph (e) to be given to the
holders of shares of Series 2 Convertible Preferred Stock
shall be deemed given if deposited in the United States
mail, postage prepaid, and addressed to each holder of
record at its address appearing on the books of the
Corporation.
6. Voting Provisions. Except as otherwise expressly provided or
required by law, the Series 2 Convertible Preferred Stock shall have no voting
rights.
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designation of Series 2 Convertible Preferred Stock to be duly executed by its
President and attested to by its Secretary this 25th day of October, 1996.
/s/ Anthony R. Cucchi
-----------------------------
Anthony R. Cucchi
/s/ Johan de Muinck Keizer
-----------------------------
Johan de Muinck Keizer
4
<PAGE>
STATE OF NEW YORK }
} ss.
COUNTY OF NEW YORK }
On August __, 1996, before me, ___________________, a notary public
in and for said state, personally appeared Anthony R. Cucchi and Johan de Muinck
Keizer, personally known to me to be the persons whose names are subscribed to
the within instrument and acknowledged to me that they executed the same in
their authorized capacities, and that by their signatures on the instrument the
entity upon behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
Signature ________________________ (Seal)
5
CERTIFICATE OF DESIGNATION
Anthony R. Cucchi and Johan de Muinck Keizer, certify that they are
the President, and Secretary, respectfully, of Global Intellicom, Inc., a Nevada
corporation (hereinafter referred to as the "Corporation"); that, pursuant to
the Corporation's Restated Articles of Incorporation and Section 78.1955 of the
Nevada General Corporation Law, the Board of Directors of the Corporation
adopted the following resolutions on September 16, 1996; and that none of the
Series 3 Convertible Preferred Stock has been issued.
1. Creation of Series 3 Convertible Preferred Stock. There is hereby
created a series of preferred stock consisting of 350,000 shares and designated
as the Series 3 Cumulative Preferred Stock, par value $.01 ("Series 3 Preferred
Stock"), having the voting powers, preferences, relative, participating,
optional and other special rights and the qualifications, limitations and
restrictions thereof as are set forth below.
2. Dividends.
(a) The holders of the shares of Series 3 Preferred Stock
shall be entitled to receive, when, as and if declared by the Board of
Directors, out of funds legally available for the payment of dividends,
cumulative dividends in cash at the annual rate of 6% of the Liquidation
Preference (as hereinafter defined). Such dividends shall be payable commencing
on June 30, 1997 and, thereafter, in equal semi-annual payments on each December
31 and June 30 (each of such dates being a "Dividend Payment Date"), in
preference to dividends on any Common Stock or stock of any other class,
ranking, as to dividend rights, junior to the Series 3 Preferred Stock. Such
dividends shall be paid to the holders of record at the close of business on the
date specified by the Board of Directors of the Corporation at the time such
dividend is declared; provided, however, that such date shall not be more than
60 days nor less than 10 days prior to the respective Dividend Payment Date.
Each of such semi-annual dividends shall be fully cumulative and shall accrue
(whether or not declared and whether or not there shall be funds legally
available for the payment of dividends) from the first day of the semi-annual
period in which such dividend may be payable as herein provided to the last day
of such semi-annual period, except that the dividend for the period ending June
30, 1997 shall accrue from the date of the issuance of the Series 3 Preferred
Stock.
(b) For any semi-annual dividend period in which dividends
are not paid at the rate stated above, on the Dividend Payment Date first
succeeding the end of such semi-annual dividend period, such accrued dividends
shall be added to the Liquidation Preference of the Series 3 Preferred Stock
(solely for the purposes of calculating dividends payable on the Series 3
Preferred Stock pursuant to the first sentence of paragraph 2(a)) effective at
the beginning of the semi-annual dividend period succeeding the semi-annual
dividend period as to which such dividends were not paid and shall thereafter
accrue additional dividends in respect thereof at the rate stated above, until
such unpaid dividends have been paid in full, at which time such dividend
<PAGE>
shall be subtracted (solely for the purpose of calculating dividends payable on
the Series 3 Preferred Stock) from the Liquidation Preference.
3. Voting. (a) Except as otherwise expressly provided herein or
provided or required by law, the Series 3 Preferred Stock shall have no voting
rights.
(b) The holders of Series 3 Preferred Stock shall have the
following special voting rights:
(i) On each second Dividend Payment Date that
quarterly dividends on Series 3 Preferred Stock shall not have been paid in full
as required herein (a "Dividend Default"), then and in each such event, the
holders of shares of Series 3 Preferred Stock shall be entitled to elect such
number of directors ("Special Directors") as set forth in Section 3(b)(v),
hereof, at the next annual meeting of stockholders of the Corporation. The
holders of all shares otherwise entitled to vote for directors, voting
separately as a class, shall be entitled to elect the remaining members of the
Board of Directors. Such special voting right of the holders of shares of Series
3 Preferred Stock may be exercised until all dividends in default on the Series
3 Preferred Stock shall have been paid in full or declared and funds sufficient
therefor set aside, and when so paid or provided for together with one
additional Dividend Payment Date shall have passed without a Dividend Default,
such special voting right of the holders of shares of Series 3 Preferred Stock
shall cease and any directors appointed or elected under this Section 3(b) shall
resign, but subject always to the same provisions for the vesting of such
special voting rights in the event of any such future Dividend Default.
(ii) At any time after such special voting
rights shall have so vested in the holders of shares of Series 3 Preferred
Stock, the Secretary of the Corporation may, and upon the written request of the
holders of record of 10% or more in number of the shares of Series 3 Preferred
Stock then outstanding addressed to the Secretary at the principal executive
office of the Corporation shall, call a special meeting of the holders of shares
of Series 3 Preferred Stock, for the election of the Special Directors to be
elected by them as herein provided, to be held within 60 days after such call
and at the place and upon the notice provided by law and in the Bylaws for the
holding of meetings of stockholders; provided, however, that the Secretary shall
not be required to call such special meeting in the case of any such request
received less than 90 days before the date fixed for any annual meeting of
stockholders, and if in such case such special meeting is not called or held,
the holders of shares of Series 3 Preferred Stock shall be entitled to exercise
the special voting rights provided in this paragraph at such annual meeting. If
any such special meeting required to be called as above provided shall not be
called by the Secretary within 30 days after receipt of any such request, then
the holders of record of 10% or more in number of the shares of Series 3
Preferred Stock then outstanding may designate in writing one of their number to
call such meeting, and the person so designated may, at the expense of the
Corporation, call such meeting to be held at the place and upon the notice given
by such person, and for that sole purpose shall have access to the stock books
of the Corporation. No such special meeting and no adjournment thereof shall be
held on a date later than 60 days before the
-2-
<PAGE>
annual meeting of stockholders. If, at any meeting so called or at any annual
meeting held while the holders of shares of Series 3 Preferred Stock have the
special voting rights provided for in this paragraph, the holders of not less
than 40% of the aggregate voting power of Series 3 Preferred Stock then
outstanding are present in person or by proxy, which percentage shall be
sufficient to constitute a quorum for the election of additional directors as
herein provided, the then authorized number of directors of the Corporation
shall be increased by the number of Special Directors to be elected, as of the
time of such special meeting or the time of the first such annual meeting held
while such holders have special voting rights and such quorum is present, and
the holders of shares of Series 3 Preferred Stock, voting as a class, shall be
entitled to elect the Special Director or Directors so provided for. If the
directors of the Corporation are then divided into classes under provisions of
the Certificate of Incorporation of the Corporation or the Bylaws, the Special
Director or Directors shall belong to each class of directors in which a vacancy
is created as a result of such increase in the authorized number of directors.
If the foregoing expansion of the size of the Board of Directors shall not be
valid under applicable law, then the holders of shares of Series 3 Preferred
Stock, voting as a class, shall be entitled, at the meeting of stockholders at
which they would otherwise have voted, to elect a Special Director or Directors
to fill any then existing vacancies on the Board of Directors, and shall
additionally be entitled, at such meeting and each subsequent meeting of
stockholders at which directors are elected, to elect all of the directors then
being elected until by such class vote the appropriate number of Special
Directors has been so elected.
(iii) Upon the election at such meeting by the
holders of shares of Series 3 Preferred Stock, voting as a class, of the Special
Director or Directors they are entitled so to elect, the persons so elected,
together with such persons as may be directors or as may have been elected as
directors by the holders of all shares otherwise entitled to vote for directors,
shall constitute the duly elected directors of the Corporation. Each Special
Director so elected by holders of shares of Series 3 Preferred Stock, voting as
a class, shall serve until the next annual meeting or until their respective
successors shall be elected and qualified, or if any such Special Director is a
member of a class of directors under provisions dividing the directors into
classes, each such Special Director shall serve until the annual meeting at
which the term of office of such Special Director's class shall expire or until
such Special Director's successor shall be elected and shall qualify, and at
each subsequent meeting of stockholders at which the directorship of any Special
Director is up for election, said special class voting rights shall apply in the
reelection of such Special Director or in the election of such Special
Director's successor; provided, however, that whenever the holders of shares of
Series 3 Preferred Stock shall be divested of the special rights to elect one or
more Special Directors as above provided, the terms of office of all persons
elected as Special Directors, or elected to fill any vacancies resulting from
the death, resignation, or removal of Special Directors shall forthwith
terminate (and the number of directors shall be reduced accordingly).
(iv) If, at any time after a special meeting of
stockholders or an annual meeting of stockholders at which the holders of shares
of Series 3 Preferred Stock, voting as a class, have elected one or more Special
Directors as provided above, and while the holders of
-3-
<PAGE>
shares of Series 3 Preferred Stock shall be entitled so to elect one or more
Special Directors, the number of Special Directors who have been so elected (or
who by reason of one or more resignations, deaths or removals have succeeded any
Special Directors so elected) shall by reason of resignation, death or removal
be reduced, the vacancy in the Special Directors may be filled by any one or
more remaining Special Director or Special Directors. In the event that such
election shall not occur within 30 days after such vacancy arises, or in the
event that there shall not be incumbent at least one Special Director, the
Secretary of the Corporation may, and upon the written request of the holders of
record of 10% or more in number of the shares of Series 3 Preferred Stock and
each Other Series of Preferred Stock then outstanding addressed to the Secretary
at the principal office of the Corporation shall, call a special meeting of the
holders of shares of Series 3 Preferred Stock, for an election to fill such
vacancy or vacancies, to be held within 60 days after such call and at the place
and upon the notice provided by law and in the Bylaws for the holding of
meetings of stockholders; provided, however, that the Secretary shall not be
required to call such special meeting in the case of any such request received
less than 90 days before the date fixed for any annual meeting of stockholders,
and if in such case such special meeting is not called, the holders of shares of
Series 3 Preferred Stock so entitled to vote shall be entitled to fill such
vacancy or vacancies at such annual meeting. If any such special meeting
required to be called as above provided shall not be called by the Secretary
within 30 days after receipt of any such request, then the holders of record of
10% or more in number of the shares of Series 3 Preferred Stock then outstanding
may designate in writing one of their number to call such meeting, and the
person so designated may, at the expense of the Corporation, call such meeting
to be held at the place and upon the notice above provided, and for that purpose
shall have access to the stock books of the Corporation; no such special meeting
and no adjournment thereof shall be held on a date later than 60 days before the
annual meeting of stockholders.
(v) On September 30, 1997, in the event that by
such date there has been a Dividend Default relating to the dividend due on June
30, 1997, the holders of Series 3 Preferred Stock shall be entitled to elect a
number of directors sufficient to constitute 15% of the total number of
directors of the Company. On the second subsequent Dividend Payment Date on
which there has been a Dividend Default, the holders of the Series 3 Preferred
Stock shall be entitled to elect a number of directors sufficient to constitute
an additional 15% of the total number of directors of the Company, and,
thereafter, after each second subsequent Dividend Payment Date on which there
has been a Dividend Default, the holders of the Series 3 Preferred Stock shall
be entitled to elect a number of directors constituting an additional 15% of the
Board of Directors.
In the event that the size of the Board of Directors is increased at
any time during which any Special Director is serving thereon, such vacancies
shall be filled first by Special Directors elected by the holders of the Series
3 Preferred Stock until the appropriate number of Special Directors shall have
been so elected.
4. Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series 3
Preferred Stock then outstanding shall be
-4-
<PAGE>
entitled to be paid out of the assets of the Corporation available for
distribution to its stockholders, whether from capital, surplus or earnings,
before any payment shall be made to the holders of any stock ranking on
liquidation, dissolution or winding up junior to the Series 3 Preferred Stock
(with respect to rights on liquidation, dissolution or winding up, the Series 3
Preferred Stock shall rank prior to the Common Stock), an amount equal to $10.00
per share of Series 3 Preferred Stock plus an amount equal to all accumulated
and unpaid dividends thereon, whether or not declared, to the date of such
distribution (the "Liquidation Preference"). If upon any liquidation,
dissolution or winding up the Corporation, the assets of the Corporation
available for distribution to its stockholders shall be insufficient to pay the
holders or shares of Series 3 Preferred Stock the full amounts to which they
respectively shall be entitled, the holders of shares of Series 3 Preferred
Stock shall share ratably in any distribution of assets according to the
respective amounts which would be payable in respect of the shares held by them
upon such distribution if all amounts payable on or with respect to said shares
were paid in full. In the event of any liquidation, dissolution or winding up of
the Corporation, after payment shall have been made to the holders of shares of
Series 3 Preferred Stock of the full amounts to which they respectively shall be
entitled as aforesaid, holders of any class or classes of stock ranking on
liquidation, dissolution or winding up junior to the Series 3 Preferred Stock
shall be entitled, to the exclusion of the holders of shares of Series 3
Preferred Stock, to share, according to their respective rights and preferences,
in all remaining assets of the Corporation available for distribution to its
stockholders. Neither the merger or consolidation of the Corporation into or
with another corporation or the merger or consolidation of any other corporation
into or with the Corporation, or the sale, transfer or other disposition of all
or substantially all the assets of the Corporation shall be deemed to be a
liquidation, dissolution or winding up of the Corporation.
5. Conversion. The holders of Series 3 Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Each share of Series 3 Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, into Common Stock as more fully described below. The
number of shares of fully paid and nonassessable Common Stock into which each
share of Series 3 Preferred Stock may be converted shall be determined by
dividing $10.00 plus all accrued but unpaid dividends on the Series 3 Preferred
Stock by the Conversion Price (as hereinafter defined) in effect at the time of
conversion. The Conversion Price shall initially be $10.00 subject to adjustment
as provided in Section 6 below.
(b) No fractional shares of Common Stock shall be issued
upon conversion of the Series 3 Preferred Stock and in lieu of any fractional
shares to which the holder would otherwise be entitled, the number of shares of
Common Stock issuable upon conversion shall be rounded to the nearest whole
number.
(c) The holder of any shares of Series 3 Preferred Stock
may exercise the conversion right pursuant to Section 4(a) as to any part
thereof by delivering to the Corporation during regular business hours, or at
such other place as may be designated by the Corporation, the
-5-
<PAGE>
certificate or certificates for the shares to be converted, duly endorsed or
assigned in blank or to the Corporation (if required by it), accompanied by
written notice stating that the holder elects to convert such shares and stating
the name or names (with address) in which the certificate or certificates for
the shares of Common Stock are to be issued. Conversion shall be deemed to have
been effected on the date when the aforesaid delivery is made and such date is
referred to herein as the "Conversion Date". As promptly as practicable
thereafter, the Corporation shall issue and deliver to or upon the written order
of such holder, to the place designated by such holder, a certificate or
certificates for the number of shares of Common Stock to which such holder is
entitled. The person in whose name the certificate or certificates for Common
Stock are to be issued shall be deemed to have become a stockholder of record on
the applicable Conversion Date unless the transfer books of the Corporation are
closed on that date, in which event such person shall be deemed to have become a
stockholder of record on the next succeeding date on which the transfer books
are open. Upon conversion of only a portion of the number of shares covered by a
certificate representing shares of Series 3 Preferred Stock surrendered for
conversion, the Corporation shall issue and deliver to or upon the written order
of the holder of the certificate so surrendered for conversion, at the expense
of the Corporation, a new certificate covering the number of shares of Series 3
Preferred Stock representing the unconverted portion of the certificate so
surrendered.
(d) The Corporation shall, at all times when Series 3
Preferred Stock shall be outstanding, reserve and keep available out of its
authorized but unissued stock, for the purpose of effecting the conversion of
Series 3 Preferred Stock, such number of its duly authorized shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Series 3 Preferred Stock.
(e) All shares of Common Stock which may be issued in
connection with the conversion provisions set forth herein will, upon issuance
by the Corporation, be validly issued, fully paid and non-assessable.
6. Call Option. The Corporation shall have the option to call all or
part of the shares of Series 3 Preferred Stock by providing the holder thereof a
notice of not less than five (5) "trading days." A trading day shall mean a day
during which the exchange or organization where the Common Stock of the
Corporation is traded is open for business. Receipt of a notice exercising this
call option by the holders of the Series 3 Preferred Stock shall not prejudice
the rights of the holder thereof under Section 5 hereof. The exercise price of
the call option shall be equal to the Liquidation Preference and shall be
payable within three (3) business days after the expiration of the five trading
day call period.
7. Adjustments. The Conversion Price initially shall be $10.00. The
Conversion Price from time to time in effect shall be subject to adjustment (to
the nearest tenth of a cent) from time to time as follows:
-6-
<PAGE>
(a) In the event the Corporation at any time or from time
to time effects a subdivision or combination of its outstanding Common into a
greater or lesser number of shares without a proportionate and corresponding
subdivision or combination of its outstanding Series 3 Preferred Stock, then and
in each such event the Conversion Price shall be decreased or increased
proportionately.
(b) In case of any merger (other than a merger in which
the Corporation is not the continuing or surviving entity) or any
reclassification of the Common Stock of the Corporation, each share of the
Series 3 Preferred Stock shall thereafter be convertible into that number of
shares of stock or other securities or property to which a holder of the number
of shares of Common Stock issuable upon conversion of a share of Series 3
Preferred Stock immediately prior to such merger or reclassification would have
been entitled upon such merger or reclassification. In any such case,
appropriate adjustment (as determined by the Board of Directors in good faith)
shall be made in the application of the provisions herein set forth with respect
to the rights and interests thereafter of the holders of Series 3 Preferred
Stock, such that the provisions set forth herein shall thereafter be applicable,
as nearly as reasonably may be, in relation to any share of stock or other
property thereafter issuable upon conversion.
(c) Whenever the Conversion Price shall be adjusted as
provided in this Paragraph 6, the Corporation shall forthwith file, at the
office of the Corporation or of any transfer agent designated as transfer agent
for the Series 3 Preferred Stock, a statement, certified by the President of the
Corporation, showing in detail the facts requiring such adjustment and the
Conversion Price that shall be in effect after such adjustment. The Corporation
shall also cause a copy of such statement to be sent by first class mail,
postage prepaid, to each holder of record of Series 3 Preferred Stock at such
holder's address as shown in the records of the Corporation.
(d) In the event the Corporation shall propose to take any
action of the types described in this Paragraph 6, the Corporation shall give
notice to each holder of Series 3 Preferred Stock, which notice shall specify
the record date, if any, with respect to any such action and the date on which
such action is to take place. Such notice shall also set forth such facts with
respect thereto as shall be reasonably necessary to indicate the effect of such
action (to the extent such effect may be known at the date of such notice) on
the Conversion Price and the number, kind or class of shares or other securities
or property which shall be deliverable upon conversion of the shares of Series 3
Preferred Stock. In the case of any action which would require the fixing of a
record date, such notice shall be given at least 20 days prior to that date so
fixed, and in case of all other action, such notice shall be given at least 30
days prior to the taking of such proposed action.
8. Ranking. Notwithstanding any other provisions hereof, the Series 3
Preferred Stock shall be of equivalent preference to all other existing series
of Preferred Stock of the Corporation, in all respects, including without,
limitation, payment of dividends. The Corporation shall issues no securities
senior in preference to the Series 3 Preferred Stock so long as any shares of
Series 3 Preferred Stock are outstanding, in any respect, including without
limitation,
-7-
<PAGE>
liquidation preferences or payment of dividends, but may issue securities of
equivalent preference thereto.
9. Transferability. The shares of Series 3 Preferred Stock may not be
sold, transferred, assigned, pledged or otherwise encumbered by the holder
thereof unless all outstanding shares of Series 3 Preferred Stock are
transferred, assigned, pledged or otherwise encumbered to one person or entity.
10. Notices. Any notices required to be given to the holder of the
Series 3 Preferred Stock shall be deemed given if deposited in the United States
mail, postage prepaid, and addressed to the holder of record at its address
appearing on the books of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation of Series 3 Convertible Preferred Stock to be duly executed by its
Chairman of the Board of Directors and Chief Executive Officer, and Secretary,
this 16th day September, 1996.
/s/ Anthony R. Cucchi
--------------------------
Anthony R. Cucchi
/s/ Johan de Muinck Keizer
--------------------------
Johan de Muinck Keizer
-8-
<PAGE>
STATE OF NEW YORK }
}
COUNTY OF NEW YORK }
On September 16, 1996, before me, _________________, a notary public
in and for the County of New York, the State of New York, personally appeared
Anthony R. Cucchi and Johan de Muinck Keizer, personally known to me to be the
persons whose names are subscribed to the within instrument and acknowledged to
me that they executed the same in their authorized capacities, and that by their
signatures on the instrument the entity upon behalf of which the persons acted,
executed the instrument.
WITNESS my hand and official seal.
Signature_________________________
(Seal)
-9-
CERTIFICATE OF DESIGNATION
Johan de Muinck Keizer and Anthony R. Cucchi, certify that they are
the President and Secretary, respectively, of Global Intellicom, Inc., a Nevada
corporation (hereinafter referred to as the "Corporation" or the "Company");
that, pursuant to the Corporation's Articles of Incorporation, as amended, and
Section 78.195 of the Nevada General Corporation Law, the Board of Directors of
the Corporation adopted the following resolutions on September 27, 1996; and
that none of the Series 4 Convertible Preferred Stock has been issued.
1. Creation of Series 4 Convertible Preferred Stock. There is hereby
created a series of preferred stock consisting of 25,000 shares and designated
as the Series 4 Convertible Preferred Stock, having the voting powers,
preferences, relative, participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set forth below.
2. Dividend Provisions. The holders of shares of Series 4 Convertible
Preferred Stocks shall be entitled to receive, when and as declared by the Board
of Directors out of any funds at the time legally available therefor, dividends
at a par with holders of Common Stock as if the Series 4 Convertible Preferred
Stock has been converted into Common Stock on the record date for the payment of
dividend. Dividends shall be waived with respect to any shares of Series 4
Convertible Preferred Stock which are converted prior to any dividend payment
date. Each share of Series 4 Convertible Preferred Stock shall rank on a parity
with each other share of Series 4 Convertible Preferred Stock with respect to
dividends.
3. Redemption Provisions. Except as otherwise expressly provided or
required by law, the Series 4 Convertible Preferred Stock may not be redeemed.
4. Liquidation Provisions. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the Series 4 Convertible Preferred Stock shall be entitled to receive an amount
equal to $100.00 per share. After the full preferential liquidation amount has
been paid to, or determined and set apart for, all other series of Preferred
Stock hereafter authorized and issued, if any, the remaining assets of the
Corporation available for distribution to shareholders shall be paid to the
common stock, which amount shall be distributed ratably to the holders of the
common stock. In the event the assets of the Corporation available for
distribution to its shareholders are insufficient to pay the full preferential
liquidation amount per share required to be paid the Corporation's Series 4
Convertible Preferred Stock, the entire amount of assets of the Corporation
available for distribution to shareholders shall be paid up to their respective
full liquidation amounts first to the Series 4 Convertible Preferred Stock, then
to any other series of Preferred Stock hereafter authorized and issued, all of
which amounts shall be distributed ratably among holders of each such series of
Preferred Stock, and the common stock shall receive nothing. A reorganization or
any other consolidation or merger of the Corporation with or into any other
corporation, or any other sale of all or substantially all of the assets of the
Corporation, shall not be deemed to be a liquidation, dissolution or winding up
of the Corporation within the meaning of this Section 4, and the Series 4
Convertible Preferred Stock shall be entitled only to (i) the right provided in
any agreement or plan governing the reorganization or other consolidation,
merger or sale of assets transaction, (ii) the rights contained in the Nevada
General Corporation Law and (iii) the rights contained in other Sections hereof.
<PAGE>
5. Conversion Provisions. The holders of shares of Series 4
Convertible Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
(a) Right to Convert.
(1) Each share of Series 4 Convertible Preferred Stock
(the "Preferred Shares") shall be convertible, at the option of its
holder, at any time after November 11, 1996, into a number of shares
of common stock of the Company at the initial conversion rate (the
"Conversion Rate") defined below.
The initial Conversion Rate, subject to the adjustments
described below, shall be a number of shares of common stock (rounded
to the nearest whole number) equal to $100.00 divided by the lower of
(i) Seventy Percent (70%) of the Market Price of the common stock or
$3.50. For purposes of this Section 5(a)(1), Market Price shall be
the closing bid price of the common stock on the Conversion Date, as
reported in the Wall Street Journal, as reported by the National
Association of Securities Dealers Automated Quotation System
("NASDAQ"), or the closing bid price in the over-the-counter market
if other than NASDAQ, averaged over the five trading days prior to
the date of conversion.
Such conversion shall be effectuated by surrendering the
Preferred Shares to be converted (with a copy, by facsimile or
courier, to the Company) to the Company's registrar and transfer
agent ("Transfer Agent"), with the form of conversion notice attached
hereto as Exhibit A, executed by the holder of the Preferred Share(s)
evidencing such holder's intention to convert these Preferred
Share(s) or a specified portion (as above provided) hereof, and
accompanied, if required by the Company, by proper assignment hereof
in blank. The date on which notice of conversion (the "Conversion
Date") is given shall be the date on which the holder has delivered
to the Transfer Agent, by facsimile or hand delivery, of its intent
to convert duly executed to the Transfer Agent. The Company shall
cause the Transfer Agent to complete the issuance of Common Shares
within two (2) business days of receipt of such conversion form,
provided that the Company or its agent has received the Series 4
Convertible Preferred Stock certificates which are the subject of the
conversion.
(2) No less than 250 (or multiple thereof) shares of
Series 4 Convertible Preferred Stock may be converted at any one
time. No fractional shares of common stock shall be issued upon
conversion of the Series 4 Convertible Preferred Stock, in lieu of
fractional shares, the number of shares issuable will be rounded to
the nearest whole share.
(b) Adjustments to Conversion Rate.
(1) Reclassification, Exchange and Substitution. If the
common stock issuable on conversion of the Series 4 Convertible
Preferred Stock shall be changed into the same or a different number
of shares of any other class or classes
2
<PAGE>
of stock, whether by capital reorganization, reclassification, or
otherwise (other than a subdivision or combination of shares provided
for above), the holders of the Series 4 Convertible Preferred Stock
shall, upon its conversion, be entitled to receive, in lieu of the
common stock which the holders would have become entitled to receive
but for such change, a number of shares of such other class or
classes of stock that would have been subject to receipt by the
holders if they had exercised their rights of conversion of the
Series 4 Convertible Preferred Stock immediately before that change.
(2) Reorganizations, Mergers, Consolidations or Sale of
Assets. If at any time there shall be a capital reorganization of the
Corporation's common stock (other than a subdivision, combination,
reclassification or exchange of shares provided for elsewhere in this
Section (b) or merger of the Corporation into another corporation, or
the sale of the Corporation's properties and assets as, or
substantially as, an entirety to any other person), then, as a part
of such reorganization, merger or sale, lawful provision shall be
made so that the holders of the Series 4 Convertible Preferred Stock
shall thereafter be entitled to receive upon conversion of the Series
4 Convertible Preferred Stock, the number of shares of stock or other
securities or property of the Corporation, or of the successor
corporation resulting from such merger, to which holders of the
common stock deliverable upon conversion of the Series 4 Convertible
Preferred Stock would have been entitled on such capital
reorganization, merger or sale if the Series 4 Convertible Preferred
Stock had been converted immediately before that capital
reorganization, merger or sale to the end that the provisions of this
paragraph (b)(3) (including adjustment of the Conversion Rate then in
effect and number of shares purchasable upon conversion of the Series
4 Convertible Preferred Stock) shall be applicable after that event
as nearly equivalently as may be practicable.
(c) No Impairment. The Corporation will not, by amendment
of its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, merger, dissolution, or any
other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder
by the Corporation, but will at all times in good faith assist in the
carrying out of all the provision of this Section 6 and in the taking
of all such action as may be necessary or appropriate in order to
protect the Conversion Rights of the holders of the Series 4
Convertible Preferred Stock against impairment.
(d) Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Conversion Rate for any shares
of Series 4 Convertible Preferred Stock, the Corporation at its
expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to each
holder of Series 4 Convertible Preferred Stock effected thereby a
certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is
based. The Corporation shall, upon the written request at any time of
any holder of Series 4 Convertible Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (i)
such adjustments and readjustments, (ii) the Conversion Rate at the
time in effect, and (iii) the number of shares of common stock and
3
<PAGE>
the amount, if any, of other property which at the time would be
received upon the conversion of such holder's shares of Series 4
Convertible Preferred Stock.
(e) Notices of Record Date. In the event of the
establishment by the Corporation of a record of the holders of any
class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a cash
dividend) or other distribution, the Corporation shall mail to each
holder of Series 4 Preferred Stock at least twenty (20) days prior to
the date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend or
distribution and the amount and character of such dividend or
distribution.
(f) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of common stock solely for the purpose
of effecting the conversion of the shares of the Series 4 Convertible
Preferred Stock such number of its shares of common stock as shall
from time to time be sufficient to effect the conversion of all then
outstanding shares of the Series 4 Preferred Stock; and if at any
time the number of authorized but unissued shares of common stock
shall not be sufficient to effect the conversion of all then
outstanding shares of the Preferred Stock, the Corporation will take
such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of common
stock to such number of shares as shall be sufficient for such
purpose.
(g) Notices. Any notices required by the provisions of this
Paragraph (e) to be given to the holders of shares of Series 4
Convertible Preferred Stock shall be deemed given if deposited in the
United States mail, postage prepaid, and addressed to each holder of
record at its address appearing on the books of the Corporation.
6. Voting Provisions. Except as otherwise expressly provided or
required by law, the Series 4 Convertible Preferred Stock shall have no voting
rights.
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designation of Series 4 Convertible Preferred Stock to be duly executed by its
President and attested to by its Secretary this 27th day of September, 1996.
/s/ Johan de Muinck Keizer
-----------------------------
Johan de Muinck Keizer
/s/ Anthony R. Cucchi
-----------------------------
Anthony R. Cucchi
4
<PAGE>
STATE OF NEW YORK }
} ss.
COUNTY OF NEW YORK }
On October __, 1996, before me, ___________________, a notary public
in and for said state, personally appeared Johan de Muinck Keizer and Anthony R.
Cucchi, personally known to me to be the persons whose names are subscribed to
the within instrument and acknowledged to me that they executed the same in
their authorized capacities, and that by their signatures on the instrument the
entity upon behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
Signature ________________________ (Seal)
5
REGULATION S SECURITIES SUBSCRIPTION AGREEMENT
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD IN THE UNITED
STATES OR TO U.S. PERSONS (OTHER THAN DISTRIBUTORS) UNLESS THE SECURITIES ARE
REGISTERED UNDER THE ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENT OF
THE ACT IS AVAILABLE. THIS SUBSCRIPTION AGREEMENT SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
This Regulation S Securities Subscription Agreement (the "Agreement")
is executed by the undersigned (the "Subscriber") in connection with the offer
and subscription by the undersigned to purchase shares of Series 1 Convertible
Preferred Stock (the "Preferred Stock") of Global Intellicom, Inc., a Nevada
corporation (the Company"). The Company is offering 300,000 shares of the
Preferred Stock at a price of $10.00 per share ("Shares"). The Preferred Stock
shall have a liquidation preference equal to $10.00 per Share. The Preferred
Stock may be converted into non legended and freely tradable Common Stock of the
Company after 41 days from the closing at a conversion rate equal to the lesser
of (a) 70% of the closing bid price of the Common Stock on the day of closing or
(b) 70% of the average closing bid price over the five trading days prior to the
date of conversion. This Subscription and, if accepted by the Company, the offer
and sale of Preferred Stock and the underlying Common Stock (collectively, the
"Securities"), are being made in reliance upon the provisions of Regulation S
("Regulation S") under the United States Securities Act of 1933, as amended (the
"Act"). The undersigned, in order to induce the Company to enter into the
transaction contemplated hereby and acknowledging that the Company will rely on
warranties contained herein.
1. Offer to Subscribe; Purchase Price
The Subscriber hereby offers to purchase and subscribes for the
number of shares of Preferred Stock, set forth on the signature page
to this Agreement. The Closing shall take place as set forth in the
escrow instructions attached as Exhibit A hereto.
2. Representations; Access to Information; Independent Investigation
(a) Offshore Transaction. Subscriber represents and warrants to the
Company that (i) Subscriber is not a "U.S. person" as that term is
defined in Rule 902 (o) of Regulation S; (ii) Subscriber is not
organized under the laws of the United States and was not formed for
the purpose of investing in Regulation S Securities and is not
registered under the Act; (iii) the offer and sale of the Shares will
be made in an offshore transaction and, at the same time of execution
of this Subscription Agreement, Subscriber was outside the United
States; (iv) Subscriber is purchasing the Shares for its own account
and not on behalf of any U.S. person or with a view to or in
connection with any distribution, resale, subdivision or
fractionalization of the Shares for an indefinite period of time for
a U.S. person and the sale of the Shares has not been prearranged
with any buyer in the United States; (v) the Subscriber and to the
best knowledge of the Subscriber each distributor, if any,
participating in the offering of the Shares, to the best knowledge of
Subscriber, has agreed and Subscriber agrees that all offers and
sales of the Shares prior to the expiration
<PAGE>
of a period commencing on the closing of the offering of the Shares
and ending forty days thereafter shall not be made to U.S. persons or
for the account or benefit of U.S. persons and shall otherwise be
made in compliance with the provisions of Regulation S; (vi)
Subscriber understands the restrictions on transfer of the Shares
imposed by this Agreement and U.S. securities laws and agrees to
comply with such restrictions; and (vii) the offer and sale of the
Shares to Subscriber does not violate the securities or other laws of
Subscriber's jurisdiction. Subscriber is not a distributor or dealer.
Subscriber and its controlling persons agree to indemnify the Company
for any misrepresentation contained herein.
(b) Current Public Information. The Company represents that it is a
"reporting issuer" as defined in Rule 902 (1) of Regulation S in that
it has a class of securities registered under Section 12(b) or 12(g)
of the Securities Exchange Act of 1934, (the "Exchange Act"), or is
required to file reports pursuant to Section 15(d) of the Exchange
Act and has filed all the material required to be filed pursuant to
the Exchange Act for a period of at least twelve months preceding the
date hereof (or for such shorter period as the Company was required
to file such material). The Company has furnished Subscriber with
copies of such information as may be requested by Subscriber.
(c) Independent Investigation; Access. Subscriber, in electing to
subscribe for the Securities hereunder, has relied upon an
independent investigation made by it and its representatives, if any,
and has, prior to the date hereof, been given access to and the
opportunity to examine all books and records of the Company, and all
material contracts and documents of the Company. Subscriber has been
given no oral or written representations or assurances from the
Company or any representation of the Company other than as set forth
in this Agreement or in a document executed by a duly authorized
representative of the Company making reference to this Agreement.
(d) No Government Recommendation or Approval. Subscriber understands that
no United States federal or state agency has passed upon or made any
recommendation or endorsement of the Company, this transaction or the
purchase of the Securities.
(e) The Company has not offered the Securities to the Subscriber in the
United States or, to the best knowledge of Subscriber, to any person
in the United States or any U.S. Person.
(f) No Directed Selling Efforts in Regard to this Transaction. To the
best knowledge of Subscriber and the Company neither the Company or
any person acting for the Company has conducted any "directed selling
efforts" as that term is defined in Rule 902 of Regulation S.
3. Resales
The transaction restriction in connection with this offshore offer
and sale restrict the Purchaser from offering or selling to U.S.
Persons for a forty day period. Rule 903(c)(2)(iii) governs the forty
day transaction restriction. The Purchaser hereby agrees to comply
with that restriction notwithstanding that the rules do not require
the placement of such a restrictive legend on the share certificate.
2
<PAGE>
Section 5 of the 1933 Act does not apply to sales of the Shares
outside the United States. Rule 904 provides a safe harbor for
determining that a resale has occurred outside the United States.
Section 5 of the 1933 Act prohibits resale of the Shares in the
United States except pursuant to an effective registration statement
or an exemption from registration for which the Purchaser qualifies,
including under Regulation S. The Purchaser understands the
requirements for qualifying for the exemption from registration,
other than as provided by Regulation S, are afforded by Section 4(1)
of the 1933 Act and that there can be no assurance that the Purchaser
will be able to qualify for exemption afforded by Section 4(1) of the
1933 Act. The Seller shall have no liability in the event the
Purchaser is unable to qualify for the exemption afforded by Section
4(1).
The Purchaser understands that the offer and sale of the Shares are
not being registered under the 1933 Act. The Seller is relying on the
rules governing offers and sales made outside the United States
pursuant to Regulation S. Rules 901 through 904 of Regulation S
govern this transaction.
Subscriber acknowledges and agrees that the Securities may only be
resold (a) in compliance with Regulation S; (b) pursuant to a
Registration Statement under the Act; or (c) pursuant to an exemption
from registration. Company special counsel will deliver an opinion at
closing to the effect that an exemption is available.
4. Subsequent Transfer of Securities
Subject to compliance with applicable securities law and the terms of
the Preferred Stock, the Company agrees, and shall instruct its
transfer agent, that the Securities may be transferred to any person
or entity who is not an affiliate of the Company without (a) any
further restriction on transfer or (b) the entry of a "stop transfer"
order against such Securities, provided that the person(s) or
entity(ies) requesting transfer furnish the appropriate
representations to the Company's legal counsel.
5. Registration of Securities.
The Company hereby agrees that upon the occurrence of a regulatory
development including, but not limited to, an amendment or proposed
amendment of Regulation S, or the existence of any "no-action" or
interpretive guidance, whether oral or written, for the SEC, which
calls into substantial questions the ability of Purchaser to resell
the Common Stock issuable upon conversion of the Preferred Stock
without registration, the Company shall promptly and expeditiously
file and use its best efforts to cause to become effective, a
registration statement on Form S-3 under the Securities Act and
relevant Blue Sky Laws covering the sale of the Common Stock issuable
upon conversion of the Preferred Stock. Such best efforts shall
include, but not limited to, promptly responding to all comments
received by the staff of the SEC, providing Purchaser or its counsel
with contemporaneous copy of all written communications from the
staff of the SEC and promptly preparing and filing amendments to such
registration statement which are responsive to the comments received
from the staff of the SEC. Any such registration statement shall
remain effective for up to 12 months or until all of the Securities
are sold, whichever is earlier. The Company shall provide the
Purchaser with such number of copies of the prospectus as shall be
reasonably requested to facilitate the sale of the Common Stock
issuable upon
3
<PAGE>
conversion of the Preferred Stock. The company shall bear and pay all
expenses incurred in connection with any such registration, excluding
discounts and commissions. The foregoing shall not in any way limit
Purchaser's rights in connection with the shares of Common Stock
issuable upon conversion of the Preferred Stock from selling such
shares (i) pursuant to Regulation S or (ii) pursuant to any exemption
from registration under the Securities Act.
6. Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the State of Nevada except for matters arising under the
Act or the Securities Exchange Act of 1934 which matters shall be
construed and interpreted in accordance with such laws.
Number of Shares purchased _________________ for total of $_________.
The undersigned acknowledges that this subscription shall not be
effective unless accepted by the Company as indicated below.
Dated this ___ day of August, 1996.
- ---------------------------------------
(Name) (Please Print)
- ---------------------------------------
(Signature)
- ---------------------------------------
(Mailing Address)
- ---------------------------------------
(Registration instructions)
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE ABOVE DATE.
GLOBAL INTELLICOM, INC.
By: ___________________________
4
PURCHASE AGREEMENT/OFFSHORE
SECURITIES SUBSCRIPTION AGREEMENT
THIS OFFSHORE SECURITIES AGREEMENT is executed in reliance upon the
transaction exemption afforded by Regulation S ("Regulation S") as promulgated
by the Securities and Exchange Commission ("SEC"), under the Securities Act of
1933, as amended ("1933 Act" or, the "Act").
TO: Jose Antonio Gomez, President
Fondo de Adquisiciones E Inversiones
Internacionales XL S.A.
Apartado 1474-1000 San Jose
San Jose, Costa Roca
1. Offering.
This Purchase Agreement (the "Agreement", sets forth the terms
pursuant to which the undersigned GLOBAL INTELLICOM, INC., (the "Seller"), is
selling an aggregate 425 Preferred Convertible Series 2 shares, (the "Shares")
convertible into Common Shares of GLOBAL INTELLICOM, INC., a Nevada corporation,
(the "Company") to Fondo de Adquisiciones E Inversiones Internacionales XL S.A.,
a corporation organized and existing under the laws of Costa Rica (the
"Purchaser").
The Seller hereby agrees to sell the Shares to the Purchaser for the
aggregate purchase price of U.S. Dollars, $425,000 (U.S. $1,000.00 per
Convertible Preferred Series 2 Shares) (the "Purchase Price"), which Purchase
Price shall be payable by certified, cashier's or bank check, or wire transfer
as of the Closing Date, as described below.
The Company further understands and agrees that the Convertible
Preferred Shares shall be convertible at a price which is the lower of:
1. Seventy-five percent (75%) of the closing price on the day of
closing of this Subscription Agreement; or
2. Sixty-five percent (65%) of the five day moving average as
recorded by NASDAQ on the day prior to conversion.
<PAGE>
The Purchaser shall pay the purchase price by delivering good funds
in United States dollars to the designated depository for closing by delivery of
securities verses payment.
In further consideration of the monies provided the Company by the
purchaser resulting from the purchase of Convertible Preferred shares, the
parties understand and agree that for a period of 12 months from the execution
of this agreement the Company shall neither seek nor accept funding from any
other source nor issue any shares, equities or debentures without prior approval
of the Purchaser. Should the Company accept funding or issue shares, equities or
debentures to other persons or entities without the prior approval of the
Purchaser, then the Company agrees to pay a penalty to the Purchaser amounting
to 25 percent of the value of the monies, shares, equities or debentures
borrowed from or issued to third parties. The Purchaser understands and agrees
that the Company currently has a contract for the raising of funds with World
Capital Funding, Inc. and further agrees that this paragraph shall not in any
way disturb nor supersede that contract with World Capital Funding, Inc.
Penalty/Liquidated Damages
Because the Purchaser is an Offshore entity, and because the
transaction restriction in connection with this Offshore offer and sale is
governed by Rule 903(c)(2)(iii) and because said restriction expires in 40 days,
the parties understand and agree that the removal of said restrictive legend
upon the submission of proper opinion letters and documents is time sensitive,
the Company agrees that should it or its attorneys or its transfer agent delay
the removal of the restrictive legend upon the shares involved for any reason
other than an act of God, or an act of a government regulatory agency, the
Company will pay a penalty in shares amounting to 25% of the original purchase
amount if said restrictive legend is not removed from the certificates within
ten (10) business days of proper submission. Additionally, the Company agrees to
pay an additional ten percent share penalty for each month thereafter the
restrictive legend is not removed from said shares and shares returned to the
Purchaser. Further, until the Company cures the breach witnessed by its failure
to timely remove the restrictive legend from the above cited shares by
delivering the additional shares and the liquidated damages, the Company shall
not issue or contract to issue to any other party any of its equity securities
or debt securities convertible into equity securities of the Company.
2
<PAGE>
2. Representations and Warranties of the Seller.
The Seller hereby represents, warrants and agrees with Purchaser as
follows:
(a) The Seller is the lawful owner of and has the full right, power
and authority to transfer, convey and sell the Shares to Purchaser, and the
delivery thereof to Purchaser will transfer valid title thereto, free and clear
of all liens, encumbrances and claims of every kind whatsoever.
(b) At the time of the acquisition of the Shares by Seller and
through the Closing Date, the Seller, or affiliates of the Seller, were not and
are not officers, directors or affiliates of the Company, as defined under the
Securities Act of 1933, as amended (the "Act").
(c) The execution, delivery and performance of this Agreement, the
consummation of the transactions herein contemplated, and the compliance with
the terms of this Agreement by Seller will not violate or conflict with any
provision of the Certificate of Incorporation or By-laws of the Seller, as the
same may be amended, or any agreement, instrument, law or regulation to which
the Seller is a party or by which the Seller may be bound. No governmental
license, permit, other approval or authorization with respect to this Agreement
or the acts or transaction contemplated hereby is required by law or otherwise
in order to make this Agreement or the transactions contemplated herein binding
upon the Seller. The Seller has no agreement, understanding, contract or
arrangement of any kind whatsoever relating to the transfer or assignment of the
Shares, whether by subscription, rights of conversion, reorganization, option or
otherwise.
(d) The transfer and sale of the Shares pursuant to this Agreement
will not result in a breach of or constitute a default under, or result in the
creation of any client, charge or encumbrance on the Shares to be so transferred
as a result of any existing agreement, any indenture, or other instrument to
which Seller is a party or by which Seller or the Shares are bound.
(e) The Seller has full right, power and capacity to execute, deliver
and perform its obligations under this Agreement.
(f) To the best of the Seller's knowledge, the Company's relationship
with its customers, vendors and employees are in all material respects
satisfactory. Seller is not aware of any condition, event or circumstances which
is not publicly disclosed, or if publicly disclosed is not fully or accurately
disclosed to render such disclosure not misleading, with relation to the ability
of the Company to conduct its business and operations in substantially the form
and manner as currently being conducted, or which would result or involves or
relates to any adverse consequence with respect to the Company, and its business
and/or operations.
3
<PAGE>
(g) All information provided and/or supplies to Purchaser, directly
or indirectly, by Seller in accordance with and in compliance with the
provisions of this Agreement or otherwise, is accurate and complete and does not
contain any untrue statements or a material fact or omit any material fact
necessary to make the statements therein not misleading.
(h) The amount of Shares to be sold hereunder the aggregate
constitutes less than five percent (5%) of the total number of outstanding
shares of Common Stock of the Company, inclusive of the underlying common shares
to be issued pursuant to this Subscription Agreement.
(i) To the best of the Seller's knowledge, the Company is current in
all of its reporting obligations under applicable laws and regulations,
including without limitation, under the Securities Exchange Act of 1934 (the
"Exchange Act"), and to the best of the Seller's knowledge all of such filings
made under and pursuant to the Exchange Act are correct and accurate and do not
contain any untrue statement of material fact necessary to make the statements
therein not misleading. To the best of the Seller's knowledge, the Company is
current with respect to all of its obligations with respect to the listing of
its Common Stock, including the Shares with NASDAQ or the Bulletin Board,
whichever is applicable, and the Company has not received any notification or
indication that its shares of Common Stock would not continue to qualify for
listing and trading thereon.
(j) To the best of the Seller's knowledge, since the date of the
Company's last audited financial statements set forth in the Company's Annual
Report on Form 10-K or 10-KGB, there has been no material adverse changes in the
financial condition and/or the result s of operations of the Company.
(k) In connection with the transfer and sale of the Shares, the
Seller hereby acknowledges, represents and warrants, that it is not acting, nor
will Seller be deemed to be acting as, an insurer, underwriter or dealer within
the meaning of Section 4(1) of the Act.
(l) The offer and the sale of the Shares hereunder is being made in
an Offshore Transaction, as such term is defined under Regulation S, promulgated
under the Act. No directed selling efforts, as such term is defined under
Regulation S, has been made by the Seller, an affiliate of the Seller or any
person acting on their behalf.
4
<PAGE>
3. Representations and Warranties of the Purchaser.
In connection with the transaction, the Purchaser represents and
warrants to the Seller, as follows:
(i) The Purchaser is not a U.S. Person as the term is defined under
Regulation S as promulgated by the SEC under the authority of the 1933 Act.
Furthermore, the Purchaser is not organized under the laws of the United States
and was not formed for the purpose of investing in Regulation S securities and
is not registered under the Securities Act;
(ii) At the time the buy order was originated, the Purchaser was
outside the United States.
4. Additional Representations.
The Purchaser further represents and warrants to the Seller and
agrees that:
(i) The Purchaser is purchasing the Shares for investment and not
with a view to or in connection with any distribution, resale, subdivision or
fractionalization of the Shares of an indefinite period of time, except to
non-U.S. Persons who qualify under Regulation S.
(ii) The Purchaser understands the restrictions on transfer of the
Shares imposed by this Agreement, U.S. Securities Laws and Regulations and the
laws and regulations of any other applicable country or jurisdiction, including,
without limitation, those set forth in paragraphs 5 and 6 hereof, which apply
both during and after the Restricted Period notwithstanding the absence of any
legend pertaining to such restrictions on the certificates representing the
Shares.
(iii) The Purchaser has not taken any action that would cause the
Company to be subject to any claim for commission or other fee or remuneration
by any broker, finder or other person and the Purchaser hereby indemnifies the
Company against any such claim caused by the actions of the Purchaser or any of
its employees or agents.
5
<PAGE>
5. Regulation S Transfer Restriction
The transaction restriction in connection with this Offshore offer
and sale restrict the Purchaser from offering or selling to U.S. Persons for a
forty day period. Rule 903(c)(2)(iii) governs the forty day transaction
restriction. The Purchaser hereby agrees to comply with that restriction
notwithstanding that the rules do not require the placement of such a
restrictive legend on the share certificate.
6. Restriction On Resale In The United States
Section 5 of the 1933 Act does not apply to sales of the Shares
outside the United States. Rule 904 provides a safe harbor for determining that
a resale has occurred outside the United States. Section 5 of the 1933 Act
prohibits resale of the Shares in the United States except pursuant to an
effective registration statement or an exemption from registration for which the
Purchaser qualifies. The Purchaser understands the requirements for qualifying
for the exemption form registration afforded by Section 4(1) of the 1933 Act and
that there can be no assurance that the Purchaser will be able to qualify for
exemption afforded by Section 4(1) of the 1933 Act. The Seller shall have no
liability in the event the Purchaser is unable to qualify for the exemption
afforded by Section 4(1) and is unable to offer, sell or otherwise transfer the
Shares in the United States.
7. Exemption; Reliance on Representations
The Purchaser understands that the offer and sale of the Shares are
not being registered under the 1933 Act. The Seller is relying on the rules
governing offers and sales made outside the United States pursuant to Regulation
S. Rules 901 through 904 of Regulation S govern this transaction.
6
<PAGE>
8. Transfer Agent Instructions
The self-liquidating legend shall be structured to liquidate on the
date of the forty-first day after the date of this Subscription Agreement.
Seller further warrant that no instructions, other than these instruction and
instru tions for a "Stop Transfer" instruction until the end of the said forty
day period, have been given to the transfer agent. After the end of the forty
day period, Seller and its counsel hereby agree to instruct the Seller's
transfer agent to remove any and all restrictive legends on said certificates.
Nothing in this section, however, shall affect in any way the Purchaser's
obligations and agreement to comply with all applicable securities laws upon
resale of the Shares.
9. Closing
The sale of the Shares shall be effectuated as of August 23, 1996, at
the offices of the Purchaser's attorney-in-fact, 1801 Lee Road, Suite 306,
Winter Park, Florida 32789, or such other mutually agreed upon time and place
(the "Closing Date"). The certificate(s) evidencing the Shares shall be
delivered to the Purchaser, with signature medallion guarantee, and such
certificates shall bear a restrictive legend that the Shares have not been
registered under the Act and that the Shares can be transferred only in
compliance with the Act and applicable state securities laws.
10. Conditions to the Seller's Obligation to Sell the Shares
The obligations of the Seller under this Agreement are subject, in
the discretion of the Company, to the satisfaction at or prior to the Closing
Date of the following conditions.
(a) the Seller's receipt of the Purchase Price for the Shares, as
described in Section 1 of this Agreement.
(b) The representations and warranties made by the Purchaser in this
Agreement were true when made and shall be true as at the Closing Date with the
same force and effect as if such representations and warranties were made at and
as of the Closing Date.
7
<PAGE>
(c) All of the terms, covenants and conditions of this Agreement to
be complied with and performed by the Seller on or prior to the Closing Date
shall have been fully complied with and performed.
(d) At the Closing Date, no litigation, proceeding, investigation or
inquiry shall be pending or threatened against the Company and/or the Seller,
and no proceeding, investigation or inquiry shall be pending or threatened
against the Company and/or the Seller which might result in an action to enjoin
or prevent the consummation of the transactions contemplated by this Agreement
or involving the Shares and/or which might result in any material adverse change
in the Company's business, operations or assets and properties.
(e) The Company's legal counsel shall have supplied the Company's
transfer agent with a legal opinion, with a copy to the Purchaser, providing
that the legend set forth on the certificates evidencing the Shares contemplated
herein to Purchaser in accordance with Regulation S and all stop transfer order
notations with respect to the Shares have been removed from the transfer agent's
books and records with respect thereto.
11. Indemnification
(a) Obligation of the Seller to Indemnify. The Seller hereby agrees
to indemnify, defend and hold harmless the Purchaser, its officers, directors,
principals, employees, affiliates, and shareholders, and their successors and
assigns, from and against any and all claims, damages, losses, liability,
deficiencies, actions, suits, proceedings, costs or legal expenses (collectively
the "Losses") arising out of or resulting from: (I) any breach of a covenant,
agreement, representation, or warranty by the Seller contained in this
Agreement; or (ii) events occurring in the course of or relating to the ale of
the Shares contemplated herein which are not disclosed in this Agreement prior
to the Closing Date; or (iii) any and all costs and expenses (including
reasonable attorneys' fees) related to the foregoing.
8
<PAGE>
(b) Notice of Claim. If the Purchaser receives written notice of the
commencement of any legal action, suit or proceeding with respect to which the
Seller is or may be obligated to provide indemnification pursuant to Section
7(a) above, the Purchaser shall, within thirty days of the receipt of such
written notice, give the Seller written notice thereof (a "Claim Notice").
Failure to give such Claim Notice within such thirty day period shall not
constitute a waiver by the Purchaser of its right to indemnity hereunder with
respect to such action, suit or proceeding.
(c) Defense of Claims. Upon receipt by the Seller of a Claim Notice
from the Purchaser with respect to any claim for indemnification which is based
upon a claim made by a third party ("Third Party Claim"), the Seller may assume
the defense of the third party claim with counsel of its own choosing. The
Purchaser shall cooperate in the defense of the Third Party Claim and shall
furnish such records, information and testimony and attend all such conferences,
discovery proceedings, hearings, trial and appeals as may be reasonably required
in connection therewith. The Purchaser shall have the right to employ its own
counsel in any such action, but the fees and expenses of such counsel shall be
at the expense of the Purchaser unless the Seller shall not have promptly
employed counsel to assume the defense of the Third Party Claim, win which event
such fees and expenses shall be borne by the Seller. The Seller shall not
satisfy or settle any Third Party Claim for which indemnification has been
sought and is available hereunder, without the prior written consent of the
Purchaser. If The Seller shall fail with reasonable promptness either to defend
such Third Party Claim or to satisfy or settle the same, the Seller may defend,
satisfy or settle the Third Party Claim at the expense of the Seller and the
Seller shall pay to the Purchaser the amount of any such Loss within ten days
after written demand therefor.
12. Survival of Representations and Warranties. The representations,
warranties, acknowledgments and agreements of the Purchaser and the
Seller shall survive the sale and purchase of the Shares contemplated
herein.
13. Miscellaneous.
(a) Amendment. No modification, waiver, amendment, discharge or
change of this Agreement shall be valid unless the same is evidenced by a
written instrument, executed by the party against which such modification,
waiver, amendment, discharge, or change is sought.
9
<PAGE>
(b) Notice. All notices, demands or other communications given
hereunder shall be in writing and shall be deemed to have been duly given on the
fifth calendar day after mailing by United States registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:
TO SELLER:
N.. Norman Muller,
Chairman of the Board
Global Intellicom, Inc.
747 Third Avenue
New York, New York 10017
TO PURCHASER:
Fondo de Adquisiones E Inversiones
Internacionales XL S.A.
Apartado 1474-100 San Jose
San Jose, Costa Rica
Attn: Jose Antonio Gomez, President
WITH A COPY TO:
Len Aronoff, Esq.
Attorney in Fact
1801 Lee Road, Suite 306
Winter Park, Florida 32789
(407) 628-5700
Or such other address or to such other person as any party shall designate to
the other for such purpose in the manner hereinafter set forth.
(c) Entire Agreement. This Agreement, together with the agreements
referred to herein, contains all of the understandings and agreements of the
parties with respect to the subject matter discussed herein. All prior
agreements, whether written or oral, are merged herein and shall be of no force
or effect.
10
<PAGE>
(d) Severability. The invalidity, illegality or unenforceability of
any provision or provisions of this Agreement will not affect any other
provision of this Agreement, which will remain in full force and effect, nor
will the invalidity, illegality or unenforceability of a portion of any
provision of this Agreement effect the balance of such provision. In the event
that any one or more of the provisions contained in this Agreement or any
portion thereof, shall for any reason be held to be invalid, illegal or
unenforceable in any respect, this Agreement shall be reformed, construed and
enforced as if such invalid, illegal or unenforceable provision had never been
contained herein.
(e) Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Florida, without applications to the principles of
conflicts of laws.
(f) Enforcement; Injunctive Relief. If it becomes necessary for any
party to institute legal action to enforce the terms and conditions of this
Agreement, the successful party will be awarded reasonable attorneys' fees at
all trial and appellate levels, expenses and costs. Any suit, action or
proceeding with respect to this Agreement shall be brought in the courts of
Orange County, in the State of Florida. The parties hereto hereby accept the
exclusive jurisdiction of those courts for the purpose of any such suit, action
or proceeding.
Venue for any such action, in addition to any other venue permitted
by statute, will be Orange County, Florida. The parties hereto hereby
irrevocably waive, to the fullest extent permitted by law, any objection that
any of them may now or hereafter have to the laying of venue of any suit, action
or proceeding arising out of or relating to this Agreement or any judgment
entered by any court in respect thereof brought in Orange County, Florida, and
hereby further irrevocably waive any claim that any suit, action or proceeding
brought in Orange County, Florida, has been brought in any inconvenient forum.
The parties hereto acknowledge and agree that any party's remedy at
law for a breach or threatened breach of any of the provisions of this Agreement
would be inadequate and such breach or threatened breach shall be per se deemed
as causing irreparable harm to such party. Therefore, in the event of such
breach or threatened breach, the parties hereto agree that, in addition to any
available remedy at law, including but not limited to monetary damages, an
aggrieved party, without posting any bond, shall be entitled to obtain, and the
offended party agrees not to oppose the aggrieved party's request for, equitable
relief in the form of specific enforcement, temporary restraining order,
temporary or permanent injunction, or any other equitable remedy that may then
be available to the aggrieved party.
11
<PAGE>
(g) Benefit of Agreement. The terms and provisions of this Agreement
shall be binding upon and inure to the benefit of the parties, their successors
and/or assigns.
(h) Captions. The captions in this Agreement are for convenience and
reference purposes only and in no way define, describe, extend or limit the
scope of this Agreement or the intent of any provision thereof.
(i) Number and Gender. All pronouns and any variation thereof shall
be deemed to refer to the masculine, feminine, neuter, singular or plural, as
the identity of the party or parties, or their personal representatives,
successors and assigns may require./.
(j) Further Assurances. This Agreement may be executed in any number
of counterparts, including facsimile signatures which shall be deemed as
original signatures. All executed counterparts shall constitute one agreement,
notwithstanding that all signatories are not signatories to the original or the
same counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the _____ day of August, 1996.
Number of Shares Purchased: 425
purchase Price U.S. Dollars $425,000.00
GLOBAL INTELLICOM, INC.
By:____________________________
Anthony R. Cucchi, President
AGREED AND ACCEPTED;
FONDO DE ADQUISIONES E INVERSIONES
INTERNACIONALES XL S.A.
By:________________________________________
Jose Antonio Gomez, President
12
REGULATION S SECURITIES SUBSCRIPTION AGREEMENT
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD IN THE UNITED
STATES OR TO U.S. PERSONS (OTHER THAN DISTRIBUTORS) UNLESS THE SECURITIES ARE
REGISTERED UNDER THE ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENT OF
THE ACT IS AVAILABLE. THIS SUBSCRIPTION AGREEMENT SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
This Regulation S Securities Subscription Agreement (the "Agreement")
is executed by the undersigned (the "Subscriber") in connection with the offer
and subscription by the undersigned to purchase shares of Series 4 Convertible
Preferred Stock (the "Preferred Stock") of Global Intellicom, Inc., a Nevada
corporation (the Company"). The Company is offering 25,000 shares of the
Preferred Stock at a price of $100.00 per share ("Shares"). The Preferred Stock
shall have a liquidation preference equal to $100.00 per Share. The Preferred
Stock may be converted into non legended and freely tradable Common Stock of the
Company after 41 days from the closing at a conversion rate equal to the lesser
of (a) 70% of the closing bid price of the Common Stock on the day of closing or
(b) 70% of the average closing bid price over the five trading days prior to the
date of conversion. This Subscription and, if accepted by the Company, the offer
and sale of Preferred Stock and the underlying Common Stock (collectively, the
"Securities"), are being made in reliance upon the provisions of Regulation S
("Regulation S") under the United States Securities Act of 1933, as amended (the
"Act"). The undersigned, in order to induce the Company to enter into the
transaction contemplated hereby and acknowledging that the Company will rely on
warranties contained herein.
1. Offer to Subscribe; Purchase Price
The Subscriber hereby offers to purchase and subscribes for the
number of shares of Preferred Stock, set forth on the signature page
to this Agreement. The Closing shall take place as set forth in the
escrow instructions attached as Exhibit A hereto.
2. Representations; Access to Information; Independent Investigation
(a) Offshore Transaction. Subscriber represents and warrants to the
Company that (i) Subscriber is not a "U.S. person" as that term is
defined in Rule 902 (o) of Regulation S; (ii) Subscriber is not
organized under the laws of the United States and was not formed for
the purpose of investing in Regulation S Securities and is not
registered under the Act; (iii) the offer and sale of the Shares will
be made in an offshore transaction and, at the same time of execution
of this Subscription Agreement, Subscriber was outside the United
States; (iv) Subscriber is purchasing the Shares for its own account
and not on behalf of any U.S. person or with a view to or in
connection with any distribution, resale, subdivision or
fractionalization of the Shares for an indefinite period of time for
a U.S. person and the sale of the Shares has not been prearranged
with any buyer in the United States; (v) the Subscriber and to the
best knowledge of the Subscriber each distributor, if any,
participating in the offering of the Shares, to the best knowledge of
Subscriber, has agreed and Subscriber agrees that all offers and
sales of the Shares prior to the expiration
<PAGE>
of a period commencing on the closing of the offering of the Shares
and ending forty days thereafter shall not be made to U.S. persons or
for the account or benefit of U.S. persons and shall otherwise be
made in compliance with the provisions of Regulation S; (vi)
Subscriber understands the restrictions on transfer of the Shares
imposed by this Agreement and U.S. securities laws and agrees to
comply with such restrictions; and (vii) the offer and sale of the
Shares to Subscriber does not violate the securities or other laws of
Subscriber's jurisdiction. Subscriber is not a distributor or dealer.
Subscriber and its controlling persons agree to indemnify the Company
for any misrepresentation contained herein.
(b) Current Public Information. The Company represents that it is a
"reporting issuer" as defined in Rule 902 (1) of Regulation S in that
it has a class of securities registered under Section 12(b) or 12(g)
of the Securities Exchange Act of 1934, (the "Exchange Act"), or is
required to file reports pursuant to Section 15(d) of the Exchange
Act and has filed all the material required to be filed pursuant to
the Exchange Act for a period of at least twelve months preceding the
date hereof (or for such shorter period as the Company was required
to file such material). The Company has furnished Subscriber with
copies of such information as may be requested by Subscriber.
(c) Independent Investigation; Access. Subscriber, in electing to
subscribe for the Securities hereunder, has relied upon an
independent investigation made by it and its representatives, if any,
and has, prior to the date hereof, been given access to and the
opportunity to examine all books and records of the Company, and all
material contracts and documents of the Company. Subscriber has been
given no oral or written representations or assurances from the
Company or any representation of the Company other than as set forth
in this Agreement or in a document executed by a duly authorized
representative of the Company making reference to this Agreement.
(d) No Government Recommendation or Approval. Subscriber understands that
no United States federal or state agency has passed upon or made any
recommendation or endorsement of the Company, this transaction or the
purchase of the Securities.
(e) The Company has not offered the Securities to the Subscriber in the
United States or, to the best knowledge of Subscriber, to any person
in the United States or any U.S. Person.
(f) No Directed Selling Efforts in Regard to this Transaction. To the
best knowledge of Subscriber and the Company neither the Company or
any person acting for the Company has conducted any "directed selling
efforts" as that term is defined in Rule 902 of Regulation S.
3. Resales
The transaction restriction in connection with this offshore offer
and sale restrict the Purchaser from offering or selling to U.S.
Persons for a forty day period. Rule 903(c)(2)(iii) governs the forty
day transaction restriction. The Purchaser hereby agrees to comply
with that restriction notwithstanding that the rules do not require
the placement of such a restrictive legend on the share certificate.
2
<PAGE>
Section 5 of the 1933 Act does not apply to sales of the Shares
outside the United States. Rule 904 provides a safe harbor for
determining that a resale has occurred outside the United States.
Section 5 of the 1933 Act prohibits resale of the Shares in the
United States except pursuant to an effective registration statement
or an exemption from registration for which the Purchaser qualifies,
including under Regulation S. The Purchaser understands the
requirements for qualifying for the exemption from registration,
other than as provided by Regulation S, are afforded by Section 4(1)
of the 1933 Act and that there can be no assurance that the Purchaser
will be able to qualify for exemption afforded by Section 4(1) of the
1933 Act. The Seller shall have no liability in the event the
Purchaser is unable to qualify for the exemption afforded by Section
4(1), except as provided herein.
The Purchaser understands that the offer and sale of the Shares are
not being registered under the 1933 Act. The Seller is relying on the
rules governing offers and sales made outside the United States
pursuant to Regulation S. Rules 901 through 904 of Regulation S
govern this transaction.
Subscriber acknowledges and agrees that the Securities may only be
resold (a) in compliance with Regulation S; (b) pursuant to a
Registration Statement under the Act; or (c) pursuant to an exemption
from registration. Company special counsel will deliver an opinion at
closing to the effect that an exemption is available.
4. Subsequent Transfer of Securities
Subject to compliance with applicable securities law and the terms of
the Preferred Stock, the Company agrees, and shall instruct its
transfer agent, that the Securities may be transferred to any person
or entity who is not an affiliate of the Company without (a) any
further restriction on transfer or (b) the entry of a "stop transfer"
order against such Securities, provided that the person(s) or
entity(ies) requesting transfer furnish the appropriate
representations to the Company's legal counsel.
5. Registration of Securities.
The Company hereby agrees that upon the occurrence of a regulatory
development including, but not limited to, an amendment or proposed
amendment of Regulation S, or the existence of any "no-action" or
interpretive guidance, whether oral or written, for the SEC, which
calls into substantial questions the ability of Purchaser to resell
the Common Stock issuable upon conversion of the Preferred Stock
without registration, the Company shall promptly and expeditiously
file and use its best efforts to cause to become effective, a
registration statement on Form S-3 under the Securities Act and
relevant Blue Sky Laws covering the sale of the Common Stock issuable
upon conversion of the Preferred Stock. Such best efforts shall
include, but not limited to, promptly responding to all comments
received by the staff of the SEC, providing Purchaser or its counsel
with contemporaneous copy of all written communications from the
staff of the SEC and promptly preparing and filing amendments to such
registration statement which are responsive to the comments received
from the staff of the SEC. Any such registration statement shall
remain effective for up to 12 months or until all of the Securities
are sold, whichever is earlier. The Company shall provide the
Purchaser with such number of copies of the prospectus as shall be
reasonably requested to facilitate the sale of the Common Stock
issuable upon
3
<PAGE>
conversion of the Preferred Stock. The company shall bear and pay all
expenses incurred in connection with any such registration, excluding
discounts and commissions. The foregoing shall not in any way limit
Purchaser's rights in connection with the shares of Common Stock
issuable upon conversion of the Preferred Stock from selling such
shares (i) pursuant to Regulation S or (ii) pursuant to any exemption
from registration under the Securities Act.
6. Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the State of Nevada except for matters arising under the
Act or the Securities Exchange Act of 1934 which matters shall be
construed and interpreted in accordance with such laws.
Number of Shares purchased ______________ for total consideration of
$__________.
The undersigned acknowledges that this subscription shall not be
effective unless accepted by the Company as indicated below.
Dated this ___ day of September, 1996.
- ---------------------------------------
(Name) (Please Print)
- ---------------------------------------
(Signature)
- ---------------------------------------
(Mailing Address)
- ---------------------------------------
(Registration instructions)
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE ABOVE DATE.
GLOBAL INTELLICOM, INC.
By: ______________________
4
ASSET PURCHASE AGREEMENT
among
PRO NOTES, INC.,
ALAN COSTILO
and
PRONOTES ACQUISITION CORP.
-----------------------
October __, 1996
----------------------
<PAGE>
TABLE OF CONTENTS
Page
I. PURCHASE AND SALE OF ASSETS.........................................1
1.1 Assets to be Transferred..................................1
1.2 Excluded Assets...........................................3
1.3 Liabilities to be Assumed.................................3
1.4 Excluded Liabilities......................................4
II. PURCHASE PRICE......................................................5
2.1 Purchase Price............................................5
2.2 Payment of Purchase Price.................................5
2.3 Allocation of Purchase Price..............................7
III. CLOSING.............................................................7
3.1 Closing...................................................7
IV. REPRESENTATIONS AND WARRANTIES OF SELLER
AND COSTILO.........................................................8
4.1 Organization; Standing; Authority.........................8
4.2 Authorization; Conflicts..................................8
4.3 Consents..................................................8
4.4 Financial Statements......................................9
4.5 Contracts.................................................9
4.6 Acquired Receivables.....................................10
4.7 Title to Property and Assets.............................10
4.8 Intellectual Properties..................................10
4.9 Compliance with Applicable Laws..........................11
4.10 Absence of Certain Events................................11
4.11 Employees................................................13
4.12 Employee Relations.......................................13
4.13 Suppliers and Customers, Etc.............................14
4.14 Benefit Plans............................................14
4.15 Inventory................................................15
4.16 Insurance................................................15
4.17 Environmental Matters....................................15
4.18 Capital and Advertising Expenditures.....................16
-i-
<PAGE>
Page
4.19 Brokers..................................................16
4.20 Litigation...............................................16
4.21 Arrangements with IBM....................................16
4.22 Bank Accounts; Powers of Attorney........................17
4.23 Capital Stock............................................17
4.24 Complete Business; Assets................................17
4.25 Taxes....................................................17
4.26 No Misrepresentation by Seller or Costilo; Disclosure....17
V. REPRESENTATIONS AND WARRANTIES OF BUYER............................18
5.1 Organization; Standing; Authority........................18
5.2 Authorization; Conflicts.................................18
5.3 Consents.................................................18
5.4 No Misrepresentation.....................................18
VI. CERTAIN AGREEMENTS OF SELLER, COSTILO AND BUYER....................19
6.1 Expenses of Sale.........................................19
6.2 Publicity................................................19
6.3 Post-Closing Access......................................19
6.4 Non-Competition, Non-Solicitation and Non-Disclosure.....20
VII. CERTAIN EMPLOYEE MATTERS...........................................21
7.1 Employment of Costilo....................................21
7.2 Severance Obligations....................................21
VIII. CLOSING DELIVERIES.................................................21
8.1 Deliveries of Seller.....................................21
8.2 Deliveries of Buyer......................................22
IX. SURVIVAL AND INDEMNIFICATION.......................................23
9.1 Survival of Representations and Warranties...............23
9.2 Indemnification by Seller and Costilo....................23
9.3 Indemnification by Buyer.................................23
9.4 Notice and Defense of Third Party Claims.................24
9.5 Right of Offset; Claims..................................24
-ii-
<PAGE>
Page
X. MISCELLANEOUS......................................................25
10.1 Certain Definitions......................................25
10.2 Notices..................................................26
10.3 Brokers..................................................27
10.4 Entire Agreement.........................................27
10.5 Waivers and Amendments; Preservation of Remedies.........27
10.6 No Third-Party Beneficiaries.............................27
10.7 Governing Law............................................27
10.8 Bulk Transfer Laws.......................................27
10.9 Binding Effect; Assignment; Parties in Interest..........28
10.10 Counterparts.............................................28
10.11 Further Assurances.......................................28
10.12 Schedules................................................29
10.13 Captions.................................................29
10.14 Guarantee................................................29
SCHEDULES
SCHEDULE 1.1(g) Assumed Contracts
SCHEDULE 1.4(a) Seller's Existing Liabilities
SCHEDULE 2.3 Purchase Price Allocation Procedures
SCHEDULE 4.1 Foreign Qualifications
SCHEDULE 4.3 Seller Consents
SCHEDULE 4.4 Balance Sheet Items
SCHEDULE 4.5 Contracts
SCHEDULE 4.6 Acquired Receivables
SCHEDULE 4.7 Real Property
SCHEDULE 4.8 Intellectual Properties
SCHEDULE 4.9 Compliance with Laws
SCHEDULE 4.10 Absence of Certain Events
SCHEDULE 4.11 Employees, Salaries and Severance Obligations
SCHEDULE 4.13 Suppliers and Customers, Etc.
SCHEDULE 4.14 Benefit Plans
SCHEDULE 4.16 Insurance
SCHEDULE 4.17 Environmental Matters
SCHEDULE 4.18 Capital and Advertising Expenditures
SCHEDULE 4.20 Litigation
SCHEDULE 4.21 Certain IBM Matters
SCHEDULE 4.22 Bank Accounts and Powers of Attorney
-iii-
<PAGE>
Page
SCHEDULE 4.23 Capital Stock
SCHEDULE 4.25 Certain Tax Matters
SCHEDULE 5.3 Buyer Consents
EXHIBITS
EXHIBIT A Form of Employee Non-Disclosure Agreement
EXHIBIT B Form of Costilo Employment Agreement
-iv-
<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of October __, 1996 among PRO
NOTES, INC., a Pennsylvania corporation having offices at 1546 Magee Avenue,
Philadelphia, Pennsylvania 19149 ("Seller"), ALAN COSTILO, an individual
residing at 1544 Magee Avenue, Philadelphia, Pennsylvania 19149 ("Costilo"), and
PRONOTES ACQUISITION CORP., a Pennsylvania corporation, with offices c/o Global
Intellicom, Inc., 747 Third Avenue, New York, New York 10017 ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller is engaged in the business of developing, marketing,
selling and distributing speech recognition computer software, including,
without limitation, related developer's tools and voice command control
applications (collectively, the "Business"); and
WHEREAS, Seller wishes to sell, and Buyer wishes to purchase, all of
the business and substantially all of the properties and assets of Seller, all
upon the terms and subject to the conditions set forth in this Agreement; and
WHEREAS, as a condition to consummating the transactions contemplated
by this Agreement, Buyer has required that Costilo, as the owner of
approximately 53% of the issued and outstanding shares of the capital stock of
Seller as well as certain Intellectual Property (as defined in Section 1.1(f))
used in Seller's business or relating to the Business, join with Seller in
making representations and warranties to Buyer concerning Seller and agree to
various other matters with Buyer concerning the transactions contemplated
hereunder, and, as the foregoing transactions and the transactions contemplated
hereunder provide benefit to Costilo, Costilo is willing to make such
representations, warranties and agreements;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
I. PURCHASE AND SALE OF ASSETS.
1.1 Assets to be Transferred. Upon the terms and subject
to the conditions of this Agreement, Seller hereby sells, assigns, transfers and
conveys to Buyer, and Buyer hereby purchases and accepts from Seller, all of
Seller's right, title and interest in and to all of its assets and properties,
real and personal, tangible and intangible, of every kind and wherever situated,
-1-
<PAGE>
except as set forth in Section 1.2 hereof (collectively, the "Assets"),
including, without limitation, the following:
(a) all interests in real property, whether
owned or leased (including, without limitation, Seller's leasehold interest in
the real property located at 1546 Magee Avenue, Philadelphia, Pennsylvania
19149), and the following rights relating to each such property: all tenements,
rights, hereditaments, easements and appurtenances belonging or in any way
appertaining thereto or to the reversion or remainder thereof, together with any
buildings and improvements erected thereon and fixtures appurtenant thereto, and
all right, title and interest in any rights-of-way, public places, appendages,
alleys, gores and strips of land adjoining or appurtenant thereto which are now
or hereafter used in connection therewith and awards made or to be made in lieu
of any of the foregoing;
(b) all personal property, whether owned or
leased, including, without limitation, machinery, equipment, furniture and
furnishings, motor vehicles, maintenance and operating supplies, tools and spare
parts, including, all accessions, accessories, additions, parts and replacements
and, in each case, whether or not affixed to any of the foregoing;
(c) all inventories, including, without
limitation, raw materials, work- in-process, finished goods, supplies, labels
and sales and promotional materials and brochures;
(d) all trade and other accounts and notes
receivable, and all royalties, advertising receivables and all other amounts due
Seller under all license, royalty and other similar agreements, in each case,
unpaid at the time of the Closing (as defined in Section 3 hereof)
(collectively, the "Acquired Receivables");
(e) all claims, causes of action and similar
rights, whether choate or inchoate, fixed or contingent, including, without
limitation, unliquidated rights under manufacturers' and vendors' warranties;
(f) all trademarks and trade names (including,
without limitation, the trademark and/or trade name "Pro Notes" and any
derivatives thereof), patents, copyrights, service marks, brand names, logos,
characters, fictitious business names and other marks, know-how, recipes,
processes, inventions, trade secrets, formulas, technical information, processed
technology, plans, drawings, specifications and prints, computer software
(including, without limitation, the source and object codes thereto) and all
other proprietary rights and intangible property, including, in each case, all
pending applications with respect thereto (collectively, "Intellectual
Property"), as well as all Intellectual Property developed or owned by Costilo,
whether or not developed on behalf of Seller and whether or not used in Seller's
business or relating to the Business;
(g) to the extent not included in Section
1.1(d) hereof, all rights under all contracts, agreements (including, without
limitation, license, royalty and other similar
-2-
<PAGE>
agreements), understandings, open sales and purchase orders and commitments,
supply contracts, bids, leases, rental agreements and licenses, whether oral or
written, indicated on Schedule 1.1(g) as being assumed by Buyer hereunder
(collectively, the "Assumed Contracts");
(h) all certificates of occupancy and other
licenses, permits and authorizations of governmental agencies and authorities to
the extent assignable and transferable;
(i) all books, records, files, computer
programs and software, data storage and retrieval systems, financial and other
records, whether or not incorporated with the records of a third party,
including, without limitation, all customer, distributor, dealer, and supplier
lists, written specifications and work standards;
(j) all other assets, properties and rights of
any kind or nature whatsoever; and
(k) all proceeds and products of any and all of
the foregoing items.
1.2 Excluded Assets. There shall be excluded from the
Assets to be transferred to Buyer hereunder the following assets of Sellers (the
"Excluded Assets"):
(a) all of Sellers' prepaid income taxes and
deferred tax assets;
(b) all of Seller's cash and cash equivalents,
including, without limitation, the consideration delivered to Seller pursuant to
this Agreement for the Assets delivered to Buyer hereunder;
(c) the certificate of incorporation, corporate
seal, minute books, stock books and other corporate records relating exclusively
to the corporate organization and capitalization of Seller;
(d) all Contracts (as defined in Section 4.5
hereof) other than the Assumed Contracts;
(e) all of Seller's respective insurance
policies; and
(f) all of Seller's tax records.
1.3 Liabilities to be Assumed. Upon the terms and subject
to the conditions of this Agreement, Buyer hereby assumes, and shall hereafter
pay, satisfy and discharge the following (and only the following) liabilities
and obligations of Seller to the extent the same exists on the date hereof
(individually, an "Assumed Liability" and, collectively, the "Assumed
Liabilities"):
-3-
<PAGE>
(a) Seller's liability to Jack Land and Larry
Fox (collectively, the "Finders") in the aggregate amount of $160,000 for
finders fees (the "Assumed Finders Fee") incurred in connection with the
transactions contemplated by this Agreement (originally in the amount of
$200,000, of which Buyer is contemporaneously herewith paying $40,000 to the
Finders), which Assumed Finders Fee shall be paid by Buyer to the Finders,
subject to the limitations and other provisions of Section 2.2(d)(ii), in twelve
(12) consecutive equal quarterly installments in the amount of $13,333.33 on
January 15, April 15, July 15, and October 15, of each year, commencing on
January 15, 1997 (each, a "Finders Fee Installment"); and
(b) all liabilities and obligations of Seller
under the Assumed Contracts; provided, however, that Buyer is not assuming any
payment obligations under any of the Assumed Contracts existing as of the
Closing Date.
1.4 Excluded Liabilities. Buyer shall not assume or take
title to the Assets subject to, or in any way be liable or responsible for, any
liability or obligation of Seller which is not an Assumed Liability (whether or
not referred to in any Exhibit or Schedule hereto) (each, an "Excluded
Liability" and, collectively, the "Excluded Liabilities"), including, without
limitation, the following:
(a) any of Seller's liabilities, including
without limitation, accounts payable (a true, accurate and complete list of
which liabilities of Seller as of the Closing Date is set forth on Schedule
1.4(a) hereto).
(b) any liability or obligation of Seller for
any product liability;
(c) any liability or other obligation of any
Seller arising out of (i) any Environmental Claim (as defined in Section 10.1
hereof), (ii) any incomplete, incorrect, expired or missing license,
registration or other permit required under any Environmental Law (as defined in
Section 10.1 hereof) or other applicable Law (as defined in Section 4.9 hereof),
or (iii) any violation of any applicable Law, in any such case respecting any
act, omission, condition, circumstance or other event occurring or existing on
or before the date hereof and relating in any way to (A) any of the Assets, (B)
any other aspect of the Business, (C) the import, procurement, storage,
manufacture, use, shipment, sale or disposal of any product or Environmental
Substance (as defined in Section 10.1 hereof), or (D) any conduct of Seller or
any of its Affiliates (as defined in Section 10.1 hereof), employees, officers,
directors, shareholders, agents and other representatives;
(d) any liability or other obligation for any
action, suit, investigation or proceeding at law, in equity, in arbitration or
by or before any authority threatened, pending, decided or settled, whether
prior to or after the Closing Date, involving or affecting Seller, the Business
or any Asset, whether or not disclosed;
-4-
<PAGE>
(e) any liability or other obligation of Seller
or any of its Affiliates in respect of any Plan (as defined in Section 4.15
hereof);
(f) any liability or other obligation of Seller
for any foreign, federal, state, county or local taxes of any kind or nature, or
any interest or penalties thereon, accrued for, applicable to or arising from
any period, whether prior to or after the Closing Date, or relating to the sale
of the Assets hereunder;
(g) any liability or other obligation to make
any payment to any employee of Seller or any of its Affiliates, whether relating
to salary, wages, commissions, benefits, severance, accrued vacation or any
other amounts and whether required under any agreement, applicable Law or
otherwise;
(h) any liability or other obligation of Seller
to present or past officers, directors (acting in such capacity) or shareholders
of Seller or any of its Affiliates;
(i) any liability or obligation of Seller under
any Contract other than the Assumed Contracts;
(j) except as provided in Section 1.3 hereof,
any liability or other obligation (including, without limitation, claims not
covered by insurance and claims to the extent they exceed applicable insurance
policy limits) relating to the operation of the Business prior to the date
hereof; and
(k) any liability or other obligation of Seller
for legal, accounting or other professional fees and disbursements of such
professionals in connection with the transactions contemplated by this
Agreement.
II. PURCHASE PRICE
2.1 Purchase Price. The aggregate purchase price for the
Assets (the "Purchase Price") shall be $325,000, plus the amount of any Earn-Out
Payments (as defined in Section 2.2(d) hereof) to which Seller may hereafter
become entitled, all payable as provided in Section 2.2 hereof, plus the
assumption by Buyer of the Assumed Liabilities.
2.2 Payment of Purchase Price. In consideration for the
transfer of the Assets in accordance with the terms and conditions of this
Agreement, Buyer is paying to Seller the Purchase Price as follows:
(a) $188,426.01 is being delivered
contemporaneously herewith to Heller, Kapustin Gershman & Vogel, counsel to
Seller and Costilo, as escrow agent ("HKG&V"), by wire transfer of immediately
available funds, to be held by HKG&V in escrow and out of
-5-
<PAGE>
which (i) Seller is immediately repaying to Global Intellicom, Inc., a Nevada
corporation of which Buyer is a wholly-owned subsidiary ("Global"), the
aggregate sum of $10,170, representing the principal amount of $10,000
previously loaned by Global to Seller pursuant to a Promissory Note dated August
12, 1996 (the "Working Capital Loan"), plus accrued interest through and
including the date hereof in the amount of $170, (ii) $99,149.67 is to be
disbursed by HKG&V following the Closing in accordance with the irrevocable
disbursement instructions being delivered by Seller to HKG&V at the Closing and
described in Section 8(j) hereof, and (iii) the balance is to be disbursed by
HKG&V hereafter as instructed from time to time by Seller.
(b) Contemporaneously herewith, (i) $3,074.63
is being paid by Buyer directly to the Pennsylvania Department of Revenue in
satisfaction of Seller's outstanding obligation for employee withholding taxes,
(ii) $3,635.41 is being paid by Buyer directly to the Pennsylvania Unemployment
Compensation Fund in satisfaction of Seller's outstanding obligation for
employee unemployment insurance taxes and (iii) $4,863.95 is being paid by Buyer
directly to the City of Philadelphia in satisfaction of Seller's outstanding
obligation for City of Philadelphia wage taxes.
(c) $125,000 shall be paid by Buyer to Seller
in four (4) consecutive equal quarterly installments in the amount of $31,500 on
January 15, 1997, April 15, 1997, July 15, 1997 and October 15, 1997; and
(d) (i) Subject to the provisions contained in
clauses (ii) and (iii) below, Seller shall also be entitled to receive from
Buyer an amount (the "Earn-Out Amount") equal to 3% of the gross sales of
Products (as defined in Section 10.1) by Buyer or any of its affiliates to an
unaffiliated third party purchaser during the five-year period following the
Closing Date (the "Earn-Out Period"). The Earn-Out Amount shall be paid by Buyer
to Seller within 45 days following the last day of each calendar quarter in each
year (except for the quarter ending December 31, which shall be paid within 90
days), commencing with the quarter ending December 31, 1996, with respect to
sales occurring during the then most recently ended calendar quarter (the
"Earn-Out Payments"), and be accompanied by a statement setting forth Buyer's
calculation of the amount of the Earn-Out Payment; provided that the initial
Earn-Out Payment shall be made with respect to the period from the Closing Date
through December 31, 1996. In the event that Seller does not notify Buyer within
ten (10) days of its receipt of such statement that it objects to the
computation of the amount of the Earn-Out Payment set forth therein, the
statement shall be binding and conclusive for the purposes of this Agreement.
Seller shall have reasonable access to Buyer's books and records during regular
business hours to verify Buyer's computation of the amount of the Earn-Out
Payment.
(ii) Notwithstanding the provisions
of Sections 1.3(b) and 2.2(d)(i) above, each Earn-Out Payment and each Finders
Fee Installment shall only be payable to Seller to the extent of Buyer's then
aggregate cumulative net earnings before interest and taxes as measured during
the period from the Closing Date through the date of determination ("Available
EBIT"). In addition, each Earn-Out Payment due Seller and each Incentive
Compensation Payment (as
-6-
<PAGE>
defined in the Employment Agreement (as defined in Section 7.1)) due Costilo
with respect to any calendar quarter shall be paid by Buyer and deducted from
the amount of Available EBIT before the payment of any Finders Fee Installment
due to the Finders. Notwithstanding the first sentence of this clause (ii), in
the event that, with respect to any calendar quarter hereafter, the aggregate
amount of (A) the Earn-Out Payment due Employee plus (B) the Incentive
Compensation Payment due Costilo (the sum of (A) plus (B), the "Contingent
Payment Amount") exceeds the amount of Available EBIT, the Earn-Out Payment
shall only then be paid to Seller to the extent of such amount equal to the
product of (I) the full amount of the Earn-Out Payment then due Seller and (II)
a fraction, the numerator of which shall be the amount of Available EBIT and the
denominator of which shall be the Contingent Payment Amount. The amount of any
Earn-Out Payment to which Seller shall become entitled and the amount of any
Finders Fee Installment payable to the Finders, but which is not paid to Seller
or the Finders, as the case may be, due to insufficient Available EBIT
(collectively, the "Deferred Amount"), shall accrue and be deferred, in whole or
in part, into each subsequent calendar quarter, including, if necessary, beyond
the Earn-Out Period, until such time as Buyer has sufficient Available EBIT;
provided, however, that in no event shall the Deferred Amount be deferred beyond
October 15, 2006, at which time any remaining unpaid portion of the Deferred
Amount shall be forfeited by Seller, to the extent of the deferred portion of
any Earn-Out Payments, and shall no longer constitute an Assumed Liability or be
an obligation of Buyer, to the extent of the deferred portion, if any, of the
Assumed Finders Fee.
(iii) Seller shall be entitled to
receive minimum aggregate Earn-Out Payments with respect to the Earn-Out Period
in an amount equal to $195,000 (the "Guaranteed Minimum Earn-Out Amount"). In
the event that the aggregate amount of the Earn-Out Payments to which Seller
shall become entitled is less than the Guaranteed Minimum Earn-Out Amount, Buyer
shall pay to Seller the amount of such deficiency (the "Earn-Out Deficiency
Amount") within 45 days following the end of the next ending calendar quarter
(except for the quarter ending December 31, which shall be paid within 90 days)
following the end of the Earn-Out Period. In addition, in the event that the sum
of (I) $525,000, plus (II) the aggregate amount of all Earn-Out Payments to
which Seller shall have become entitled with respect to the Earn-Out Period
(collectively referred to as the "Buyer Payments") is less than $1,950,000,
Seller shall continue to receive, and Buyer shall continue to pay to Seller,
Earn-Out Payments for an additional period, not to exceed five (5) years, until
such time as the aggregate amount of all of the Buyer Payments reaches
$1,950,000. Any such additional Earn-Out Payments shall be payable at such
times, and subject to Buyer having sufficient Available EBIT, as Earn-Out
Payments are to made to Seller during the Earn-Out Period in accordance with the
provisions of clause (ii) above.
2.3 Allocation of Purchase Price. The Purchase Price shall
be allocated among the Assets in accordance with Schedule 2.3. Seller and Buyer
agree to report, pursuant to Section 1060 of the Internal Revenue Code of 1986,
as amended (the "Code"), an allocation of the Purchase Price in accordance with
Schedule 2.3 and agree to act in accordance therewith in the preparation and
filing of all income tax returns.
-7-
<PAGE>
III. CLOSING
3.1 Closing. The closing of the purchase and sale of the
Assets and the assumption of the Assumed Liabilities (the "Closing") shall take
place at the offices of Parker Chapin Flattau & Klimpl, 1211 Avenue of the
Americas, New York, New York 10036 at 10:00 A.M. on the date hereof (the
"Closing Date").
IV. REPRESENTATIONS AND WARRANTIES OF SELLER AND COSTILO
To induce Buyer to enter into this Agreement and the other
documents and instruments contemplated hereby, to purchase the Assets and to
assume the Assumed Liabilities, Seller and Costilo hereby, jointly and
severally, represent and warrant to Buyer as follows:
4.1 Organization; Standing; Authority. Seller is a
corporation presently subsisting under the laws of the Commonwealth of
Pennsylvania and has full power and authority to carry on its business, and to
own, lease and operate its properties and assets, including, without limitation,
the Assets. Seller is duly qualified as a foreign corporation to transact
business in all jurisdictions where such qualification is necessary, a list of
which jurisdictions is set forth on Schedule 4.1 hereto. Seller has full power
and authority, and Costilo has full power and legal capacity, to enter into this
Agreement and the other documents and instruments contemplated hereby to which
it or he are party or parties (all such documents and instruments being
sometimes collectively referred to herein as the "Purchase Documents"), to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby.
4.2 Authorization; Conflicts. The execution and delivery
of this Agreement by Seller and Costilo and the other Purchase Documents to
which each of them is a party, the performance by each of its obligations
hereunder and thereunder and the consummation of the transactions contemplated
hereby and thereby (a) have been duly authorized by all necessary corporate and
other action, (b) will not conflict with, or result in a violation of, or a
default under (i) the certificate of incorporation, by-laws or other governing
documents of Seller or (ii) any contract, mortgage, indenture, lease, agreement,
instrument, permit, conversion, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Seller or Costilo or
their respective properties and assets, or (c) create or result in any Lien (as
defined in Section 10.1 hereof) on any of their respective properties or assets,
including, without limitation, the Assets. This Agreement constitutes, and each
other Purchase Document will, when executed, constitute, a legal, valid and
binding obligation of Seller and Costilo, as the case may be, enforceable
against each of them in accordance with its terms.
4.3 Consents. Except as set forth on Schedule 4.3, no
consent, license, approval, order or authorization of, or registration,
declaration or filing with, any governmental authority or other person is
required as a condition to or otherwise in connection with the
-8-
<PAGE>
execution, delivery and performance by Seller or Costilo of this Agreement, the
other Purchase Documents, the transactions contemplated hereby and thereby or
the legality, validity, binding effect or enforceability hereof or thereof.
4.4 Financial Statements.
(a) Financials. Seller's most recent financial
projections delivered to Buyer and Global are reasonable and neither Seller nor
Costilo knows of any currently existing facts or circumstances that could
reasonably be expected to result in an inability by Buyer to achieve any of such
financial projections following the Closing.
(b) Absence of Undisclosed Liabilities. Since
December 31, 1995, Seller has not incurred any liabilities or obligations other
than in the ordinary course of business. Each of such liabilities and
obligations is set forth on Schedule 4.4.
4.5 Contracts. Schedule 4.5 sets forth a complete and
correct list of all aterial oral and written contracts, agreements,
understandings, arrangements, purchase orders, sales orders, supply contracts,
bids, leases, rental arrangements and licenses to which Seller is a party or by
which Seller or the Assets may be bound, complete and correct copies of which
(including all amendments thereto) have been delivered to Buyer (collectively,
the "Contracts"), including, without limitation, the following: (a) contracts
with any current or former officer, director, employee, consultant or
shareholder, (b) contracts with any labor union or organization or other
organization representing any employee, (c) contracts for the sale of materials,
supplies, equipment, merchandise or services, (d) contracts for the purchase or
acquisition of materials, supplies, equipment, merchandise or services, (e)
licenses, royalty agreements or similar agreements (indicating on such schedule
whether Seller is the licensor or licensee thereunder), (f) warehousing,
distributorship, representative, management, marketing, sales agency, printing
or advertising contracts, (g) contracts for the sale of any of the Assets or for
the grant to any person of any preferential rights to purchase any of the
Assets, (h) joint venture contracts, (i) contracts under which Seller agrees to
indemnify any party, to guarantee or otherwise be responsible for the
obligations of any other party, to share the tax liability of any party or to
refrain from competing with any party, (j) loan and credit agreements,
mortgages, indentures, security agreements and other agreements relating to the
borrowing of money or representing deferred purchase price, (k) all agreements,
arrangements, commitments and understandings of any kind or nature with any
government, its agencies or departments, (l) contracts under which any current
or previous employee of Seller has agreed to refrain from competing with Seller
or disclosing any confidential or proprietary information concerning Seller or
the Business, or (m) any other contracts relating to the Business whether or not
made in the ordinary course of business. All Contracts are valid, binding,
enforceable and in full force and effect. Seller is not in default, no notice of
a default has been received by Seller, and there exists no condition or event
which, with notice or lapse of time or both, would constitute a default by
Seller, under or with respect to any of such Contracts. No other party to any of
the Contracts is in default under any of the Contracts, and there exists no
condition or event which, with notice or lapse of time or both, would constitute
a default by any
-9-
<PAGE>
other party to any such Contract. Except as set forth on Schedule 4.5, each of
the Contracts may be assigned to Buyer without the consent of any person.
4.6 Acquired Receivables. Schedule 4.6 sets forth a
complete and correct list and aging by month of each Acquired Receivable. Each
Acquired Receivable arose in the ordinary course of business in a bona fide
arm's-length transaction, has been reflected on Seller's books and records in
accordance with generally accepted accounting principles consistently applied,
and is represented by a written invoice or other written document that: (a) is
legal, valid, binding and enforceable against the obligor in accordance with its
terms and provisions, (b) does not violate or conflict with any provision of
applicable Law, (c) has not been amended or modified in any respect, (d)
reflects all agreements and understandings with the obligor thereof, and (e) is
assignable to Buyer without the consent of the obligor.
4.7 Title to Property and Assets. Schedule 4.7 sets forth
a complete and rect list of the real property owned or leased by each Seller.
Seller has good and marketable title to such property in fee simple absolute
(except for leasehold interests, in which event Seller has a valid leasehold
interest), free and clear of all Liens except Permitted Liens (as defined in
Section 10.1 hereto). Seller has good and marketable title to all of its other
Assets, free and clear of all Liens. The Assets being transferred to Buyer
pursuant to this Agreement and the other Purchase Documents constitute all of
the assets and properties necessary to the operation of the Business. No person
or entity has any rights in any of the Assets that could have an adverse effect
upon, or otherwise interfere with the continued use of, any of the Assets by
Buyer following the Closing.
4.8 Intellectual Properties.
(a) Schedule 4.8 contains a complete and
accurate list of each item of Intellectual Property licensed to, owned or
otherwise used at any time by Seller and all Intellectual Property developed or
owned by Costilo, whether or not developed on behalf of Seller and whether or
not used in Seller's business or relating to the Business. Except as set forth
on Schedule 4.8, each item of Intellectual Property (i) has been maintained and
used in accordance with all applicable Laws, (ii) is assignable to Buyer in
accordance with the terms and provisions hereof and thereof, and (iii) to the
best knowledge of Seller and Costilo, is not and has not been infringed in any
way by any other person.
(b) No item of Intellectual Property infringes
any trademark, service mark, trade name, copyright or patent (or similar right)
of others in any jurisdiction and either Seller or Costilo has all right and
authority to use each item of Intellectual Property, whether in Seller's
business or otherwise. Neither Seller nor Costilo has received any notification
from any person that the use of any item of Intellectual Property by Seller,
Costilo or anyone claiming any right from Seller or Costilo to use any item of
Intellectual Property infringes the rights of any third party.
-10-
<PAGE>
(c) Except as set forth on the schedule to this
Section, all technical information, procedures, processes, trade secrets,
formulae, methods, practices, techniques, information, bills of parts, diagrams,
drawings, specifications, blueprints, lists of materials, labor and general
costs, production manuals and data relating to the design, manufacture,
production, inspection and testing of products (collectively, the "Know-How")
developed, sold or used by Seller is owned by Seller, may be utilized by Seller
without the consent or license of any third party, is free and clear of all
liens and Seller does not pay royalties to any third party in respect of the use
by it of the Know-How. Seller has not received any notification of infringement
by it or other adverse claim with regard to any Know-How used by it. No Know-How
used by Seller infringes upon or otherwise violates any rights of others.
(d) Each current and former employee of Seller
has assigned to Seller all of such employee's rights to, and benefits to be
derived from, each item of Intellectual Property and Know-How developed by such
employee while employed by Seller.
4.9 Compliance with Applicable Laws. Except as set forth
on Schedule 4.9, Seller and its operation of the Business is in material
compliance with and conforms in all material respects to (a) all applicable
judgments, orders, injunctions, awards and decrees, and (b) all foreign,
federal, state and local laws, statutes, ordinances, codes, rules and
regulations and all other requirements of governmental bodies, courts and
arbitrators (collectively, "Laws") that are applicable to Seller, the Business
or the Assets (including, without limitation, the Federal Occupational Safety
and Health Act of 1970, as amended, and the rules and regulations issued
thereunder). Except as set forth on Schedule 4.9, Seller has remedied or caused
to be remedied in all respects all violations of any such Laws of which Seller
or Costilo has knowledge. Schedule 4.9 sets forth a list of all certificates of
occupancy and other permits, licenses, authorizations, consents and approvals of
governmental agencies and authorities necessary or desirable for the conduct of
the Business. All such certificates of occupancy, and other permits, licenses,
authorizations, consents and approvals are in full force and effect, are
assignable to Buyer without the consent of any person and, except as set forth
on Schedule 4.9, no notice has been served upon Seller (other than a notice
subsequently withdrawn or with regard to a violation subsequently cured) from
any governmental authority or other person claiming, nor does there currently
exist, any violation of any applicable Law in connection with any of such
activities.
4.10 Absence of Certain Events. Except as set forth on
Schedule 4.10, since December 31, 1995, Seller has not:
(a) incurred any obligations or liabilities,
whether direct or contingent, or made any guarantees, endorsements or other
assumptions of liabilities other than in the ordinary course of business (which,
in no event, has included liabilities for borrowed money or extensions of
credit);
(b) mortgaged, pledged or subjected to any Lien
any of its properties or assets, tangible or intangible (including, without
limitation, the Assets);
-11-
<PAGE>
(c) acquired or disposed of any assets or
properties, or, except in connection with the transactions contemplated by this
Agreement and the other Purchase Documents, entered into any agreement or other
arrangement for any such acquisition or disposition, other than in the ordinary
course of business;
(d) forgiven or canceled debts or claims or
waived any rights of material value;
(e) conducted its business or entered into any
transaction, other than in the ordinary course of business;
(f) granted any rights or licenses under any of
its Intellectual Properties or entered into any licensing or distributorship
arrangements with respect thereto;
(g) entered into or amended any employment
agreement, entered into any agreement with any labor union or association
representing any employees or entered into or amended any Plan;
(h) made any wage or salary increase, or paid
any bonuses or any dividends, or made any increase in any other direct or
indirect compensation, for or to any director, officer or employee of Seller;
(i) made any change in any accounting principle
or method of election for federal income tax purposes used by it;
(j) prepaid any of its obligations, except in
the ordinary course of business;
(k) made any material change in any assumption
underlying any method of calculation of bad debts, contingencies or other
reserves from those reflected in Seller's financial statements;
(l) written down the value of any inventory
having an aggregate value in excess of $1,000 or written off as uncollectible
any trade, account or note receivable on any amount due to Seller under any
license, royalty or other similar agreement having a value, individually or in
the aggregate, in excess of $1,000;
(m) made any change in any material respect in
the business policies or practices of Seller or suffered any other event which
had or may have the effect of materially impairing the business relationship of
Seller with, and the goodwill of, any of its customers, suppliers or licensees;
or
-12-
<PAGE>
(n) entered into any agreement or committed to
take any action set forth in subsections (a) through (m) of this Section 4.10.
4.11 Employees. Schedule 4.11 sets forth a complete and
correct list of the mes of all employees of Seller and, for each such employee,
the total compensation rate (annual or hourly), years or other period of service
and each wage or salary increase or bonus paid to such employee since January 1,
1995. Schedule 4.11 also sets forth, for each such employee, the (a) number of
sick days and personal days to which the employee was entitled, on an annual
basis, immediately prior to such employee's termination on the Closing Date and
the number of sick days and personal days used by such employee during the
annual period in which such termination occurred, and (b) salaries, wages,
commissions, benefits, severance payments ("Severance Payments"), accrued
vacation pay and/or any other amounts that were payable to such employee on the
Closing Date, whether relating to the termination or alleged termination of such
employee's employment by reason of the transfer of the Assets, the consummation
of the transactions contemplated by this Agreement and the other Purchase
Documents or otherwise (collectively, "Termination Amounts"). Schedule 4.11 also
sets forth all such payments made to any former employees of Seller terminated
since December 31, 1995. To the best knowledge of Seller and Costilo, no
employee listed on Schedule 4.11 has made any threat, or otherwise revealed an
intent, to cancel or otherwise terminate his relationship with Seller or the
Business.
4.12 Employee Relations. There is not, nor, to the best
knowledge of Seller and Costilo, is there now threatened, any strike, organized
slowdown, picketing, organized work stoppage or labor trouble or other
occurrence, event or condition of a similar character in which any of the
employees of Seller are participating or, to the best knowledge of Seller and
Costilo, have threatened to participate. To the best knowledge of Seller and
Costilo, during the past five (5) years, there have been no union organizing
efforts conducted with respect to any of the employees of Seller.
4.13 Suppliers and Customers, Etc. Schedule 4.13 sets
forth a complete and orrect list of (a) the ten (10) largest suppliers and/or
vendors of Seller (identified, in each case by the dollar amount of purchases
from such party) and (b) all of the customers of Seller (identified, in each
case, by the dollar amount of all purchase orders submitted by such party to
Seller, in each case, for the seven-month period ended July 31, 1996 and the
twelve-month period ended December 31, 1995. The Seller's relationships with
such suppliers, vendors and customers are satisfactory and, except as set forth
on Schedule 4.13, no such supplier, vendor or customer has canceled or otherwise
terminated, or, to the best knowledge of Seller and Costilo, made any threat to
cancel or, otherwise terminate, its relationship with Seller. Except as set
forth on Schedule 4.13, no such supplier, vendor or customer has during such
period decreased materially, or, to the best knowledge of Seller and Costilo,
made any threat to decrease materially, its services or supplies to, or
purchases from, Seller. Except as set forth on Schedule 4.13, during such period
or thereafter, no breach or default or event of default occurred or was alleged
to have occurred, and no event occurred which with notice or lapse of time or
both would have constituted a breach or default or event of default, in
connection with any contractual or other
-13-
<PAGE>
arrangements between Seller and any of its suppliers, vendors or customers.
Schedule 4.13 also sets forth a list of all license, royalty and other similar
agreements to which Seller was a party that was terminated by Seller or the
other party or parties thereunder during the past three (3) years.
4.14 Benefit Plans.
(a) Neither Seller nor any Affiliate of Seller
has maintained or maintains, contributes or is required to contribute to, any
employee pension benefit plans (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")). Schedule 4.14
sets forth each employee welfare benefit plan (as defined in Section 3(1) of
ERISA), bonus, stock purchase, stock ownership, stock option, deferred
compensation, incentive, severance, termination or other compensation plan or
arrangement, fringe benefit plan or other benefit plan, agreement or arrangement
presently maintained by, or contributed to by Seller or any Affiliate of Seller
(each, a "Plan" and, collectively, the "Plans").
(b) Seller and each of the Plans are in
compliance with the applicable provisions of ERISA and those provisions of the
Code applicable to the Plans.
(c) Except as set forth on Schedule 4.14, all
premium payments or other contributions to, and payments from, the Plans which
may have been required to be made in accordance with the Plans have been timely
made. All such premiums or other contributions to the Plans, and all payments
under the Plans, except those to be made by an insurer, for any period ending
before the Closing Date that are not yet, but will be, required to be made are
properly set forth on Schedule 4.14.
(d) Except as set forth on Schedule 4.14, all
reports, returns and similar documents with respect to the Plans required to be
filed with any government agency or distributed to any Plan participant have
been duly and timely filed or distributed.
(e) Seller has complied with the notice and
continuation coverage requirements of Section 4980B of the Code and the
regulations thereunder with respect to each Plan that is, or was during any
taxable year of Seller for which the statute of limitations on the assessment of
federal income taxes remains open, by consent or otherwise, a group health plan
within the meaning of Section 4980B(g) of the Code.
(f) At no time has (i) Seller or (ii) any other
employer that is, or, at any relevant time, was together with Seller, treated as
a "single employer" under Section 414(b), 414(c) or 414(m) of the Code, incurred
any liability which could subject Buyer or Seller to any liability under Section
4062, 4063 or 4064 of ERISA.
(g) At no time has Seller or any Affiliate of
Seller contributed, or been required to contribute, to any "multiemployer
pension plan" within the meaning of Section 3(37) of ERISA, and no liability is
owing on account of any withdrawal therefrom.
-14-
<PAGE>
(h) Seller has not incurred or is reasonably
likely to incur any liability with respect to any Plan, including, without
limitation, any plan or arrangement that would be included within the definition
of "Plan" hereunder but for the fact that such plan or arrangement was
terminated before the date of this Agreement.
(i) Neither Seller nor any Affiliate of Seller
maintains or ever has maintained or contributes, ever has contributed, or ever
has been required to contribute, to any Plan providing post-employment medical,
health or life insurance or other welfare benefits for current or future retired
or terminated employees, their spouses or their dependents, except as may be
required by applicable Law.
4.15 Inventory. Seller maintains no inventory other than
office supplies.
4.16 Insurance. Schedule 4.16 sets forth a brief
description (showing the policy umber, name of carrier, coverage, deductible
amounts, term, expiration date and annual premium) of all policies of fire,
casualty, liability and other forms of insurance owned by or for the benefit of
Seller and relating to the Business or the Assets, and all self-insurance
programs maintained for the Business and the Assets. All such policies are in
full force and effect, all premiums due thereon have been paid in full, and are
adequate in amount, scope and coverage to protect Seller against any loss (less
the deductible set forth on Schedule 4.16 with respect to such policy) in
connection with the Business or of the Assets.
4.17 Environmental Matters. Except as set forth on
Schedule 4.17, neither Seller nor any other person for whose conduct Seller is
or may be held responsible (a) has incurred any loss, expense, liability or
responsibility for any Environmental Claim related in any way to the Business or
any of the Assets, (b) has procured, stored, contained, manufactured,
distributed, removed or disposed of any inventory or other Environmental
Substance in violation of any applicable Environmental Law, (c) knows of any
spill, leakage, emission, escape, discharge, dumping, leaching or other release
or disposition into the environment of any Environmental Substance, or of any
circumstance or condition that could lead thereto, related in any way to the
Business or any of the Assets.
4.18 Capital and Advertising Expenditures. Set forth on
Schedule 4.18 is a omplete and correct list of and amount spent in cash for each
capital expenditure by Seller in excess of $1,000 individually or $2,500 in the
aggregate for the period commencing on January 1, 1995 through the date hereof
for equipment received during such period. Schedule 4.18 also sets forth the
location of such equipment. Complete and correct copies of all Contracts
relating to each such capital expenditure have previously been delivered to
Buyer.
4.19 Brokers. Seller has not paid or become obligated to
pay any fee or commission to any broker, finder, investment banker or other
intermediary in connection with this Agreement or the transactions contemplated
hereby other than to Jack Land and Larry Fox.
-15-
<PAGE>
Since December 31, 1995, Seller has not incurred (whether by payment or accrual)
any such fee or commission.
4.20 Litigation. Except as set forth on Schedule 4.20,
there are no actions, suits, investigations or proceedings (whether or not
purportedly on behalf of Seller) pending or, to the best knowledge of Seller and
Costilo, threatened or contemplated, at law, in equity, in arbitration or by or
before any other authority involving or affecting: (a) Seller, any part of the
Assets or any of the Assumed Liabilities; or (b) any of the transactions
contemplated by this Agreement and the Purchase Documents, nor, to the best
knowledge of Seller and Costilo, is there any basis for the institution of any
such action, suit, investigation or proceeding. Without limiting the generality
of the preceding sentence, Schedule 4.20 sets forth a list and description
(including the status) of each claim, action, suit, investigation and proceeding
involving Seller and any employee of Seller. Seller is in compliance with each
judgment, order, writ, injunction, decree or consent of any court or other
judicial authority relating to, binding or affecting Seller, any part of the
Business or the Assets, or any of the Assumed Liabilities, each of which is set
forth an Schedule 4.20.
4.21 Arrangements with IBM. Schedule 4.21 hereto sets
forth a complete and ccurate list of all agreements, contracts or commitments
(whether oral or written) between International Business Machines Corporation
("IBM") and Seller (collectively, the "IBM Agreements"). Complete and accurate
copies of all of the IBM Agreements have been delivered by Seller to Buyer.
Schedule 4.21 sets forth the amount and due date of each account receivable due
Seller from IBM. Seller is not in default under any of the IBM Agreements, and
there is no default or event known to Seller or Costilo that, with notice or
lapse of time, or both, would constitute a default by any party to any of the
IBM Agreements. Neither Seller nor Costilo has received notice from IBM that IBM
intends to cancel or terminate any of the IBM Agreements, to exercise or not to
exercise any options or rights under any of the IBM Agreements, or to not accept
any of the products previously developed or to be developed in the future by
Seller pursuant to the IBM Agreements, and there are no facts or circumstances
of which Seller or Costilo has knowledge that could reasonably be expected to
result in any such non-acceptance by IBM. No dispute exists between IBM and
Seller under any of the IBM Agreements. Seller has not waived or failed to
exercise any options or rights under any of the IBM Agreements. To the best
knowledge of Seller and Costilo, there has not occurred any event, and Seller
and Costilo are not aware of any facts or circumstances, with respect to the
matters that are the subject of the IBM Agreements, that could have an adverse
effect upon the Business as it is proposed to be conducted by Buyer following
the Closing.
4.22 Bank Accounts; Powers of Attorney. Schedule 4.22 sets
forth a complete nd correct list of the location of and the persons authorized
to sign with respect to each of the bank accounts of Seller or which relate to
any of the Assets or the Business. Schedule 4.22 also sets forth a complete and
correct list of all powers of attorney, proxies and other like instruments to
act on behalf of Seller or any other party in connection with the Business, any
of the Assets or any of the Assumed Liabilities.
-16-
<PAGE>
4.23 Capital Stock. The authorized capital stock of Seller
consists of 10,000 shares of common stock, no par value per share, of which
9,500 shares are issued and outstanding and are owned beneficially and of record
by the persons and in the respective amounts as set forth on Schedule 4.23
hereto. Seller has no other class of authorized capital stock.
4.24 Complete Business; Assets. Except for the Excluded
Assets, the Assets and Assumed Contracts represent all of the Assets and
contract rights used by Seller to conduct its business in the manner in which it
has previously been conducted by it. Neither Seller, Costilo nor any of their
respective Affiliates directly or indirectly presently conducts, or has
previously conducted, any operations relating to the Business other than by or
through Seller. Except for the Intellectual Property owned by Costilo and being
sold, assigned and transferred to Buyer hereunder as part of the Assets, none of
the business conducted by Seller utilizes any Assets or rights of any person or
entity other than those included in the Assets and the Assumed Contracts.
4.25 Taxes. Except as set forth on Schedule 4.25, Seller
has filed all tax returns required to be filed by Seller on or before the date
hereof and has duly and timely paid all taxes (including any interest and
penalties) due and payable in respect of all periods up to and including the
date hereof. Except as set forth on Schedule 4.25, Seller has duly and timely
withheld or collected, paid over and reported all taxes required to be withheld
or collected by Seller on or before the date hereof.
4.26 No Misrepresentation by Seller or Costilo;
Disclosure. No representation or warranty of Seller or Costilo made or contained
in this Agreement or any other Purchase Document, and no report, statement,
certificate, schedule or other document or information furnished or to be
furnished by or on behalf of Seller or Costilo in connection with the
transactions contemplated by this Agreement and the other Purchase Documents,
contains or will contain a misstatement of a material fact or omits or will omit
to state a material fact required to be stated therein in order to make it, in
the light of the circumstances under which made, not misleading. In addition,
the parties acknowledge that Seller and Costilo make no representation or
warranty herein as to the marketability of any of Seller's products.
V. REPRESENTATIONS AND WARRANTIES OF BUYER
To induce Seller to enter into this Agreement and the other documents
and instruments contemplated hereby, Buyer represents and warrants to Seller as
follows:
5.1 Organization; Standing; Authority. Buyer hereby is a
corporation presently subsisting under the laws of the Commonwealth of
Pennsylvania and has full power and authority to carry on its business as now
conducted. Buyer has full corporate power and authority to enter into this
Agreement and the other Purchase Documents to which it is a party, to perform
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby.
-17-
<PAGE>
5.2 Authorization; Conflicts. The execution and delivery
of this Agreement and the Purchase Documents by Buyer, the performance by Buyer
of its obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby (a) have been duly authorized by
all necessary corporate action, (b) will not conflict with, or result in a
violation of or a default under (i) the certificate of incorporation or by-laws
of Buyer or (ii) any contract, mortgage, indenture, lease, agreement,
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Buyer. This Agreement
constitutes, and each other Purchase Document to which Buyer is a party will,
when executed, constitute, a legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms.
5.3 Consents. Except as set forth on Schedule 5.3, no
consent, license, approval, order or authorization of, or registration,
declaration or filing with, any governmental authority or other person is
required as a condition to or otherwise in connection with the execution,
delivery and performance of the Agreement, the other Purchase Documents or the
transactions contemplated hereby and thereby or the legality, validity, binding
effect or enforceability hereof or thereof.
5.4 No Misrepresentation. No representation or warranty of
Buyer made or contained in this Agreement or any other Purchase Document, and no
report, statement, certificate, schedule or other document furnished or to be
furnished by or on behalf of Buyer in connection with the transactions
contemplated by this Agreement and the other Purchase Documents contains or will
contain a misstatement of a material fact or omits or will omit to state a
material fact required to be stated therein in order to make the statement
contained therein, in light of the circumstances under which it is made, not
misleading.
VI. CERTAIN AGREEMENTS OF SELLER, COSTILO AND BUYER
6.1 Expenses of Sale. Except as expressly provided in
Section 1.3(b) and as set forth below in this Section 6.1, Seller and Buyer
shall each bear their own direct and indirect expenses incurred in connection
with the negotiation and preparation of this Agreement, the other Purchase
Documents and the consummation and performance of the transactions contemplated
hereby and thereby. Any excise, sales, use, gross receipts or similar taxes (but
not including the real estate taxes referred to in the next succeeding sentence
of this Section 6.1), whether imposed on Buyer or Seller, arising solely out of
the transfer of the Assets shall be paid by Seller (and any refund of such taxes
shall likewise be paid to, and shall be deemed to be the property of Seller).
Any real estate transfer or similar taxes with respect to the transfer of the
real property and leasehold interests constituting part of the Assets and any
taxes based on income recognized or realized by Seller as a result of the
transfer and sale of any or all of the Assets shall be paid by Seller (and any
refund of such taxes shall be paid to, and shall be deemed to be the property
of, Seller). Buyer and Seller will cooperate with one another in filing any
required tax returns and in
-18-
<PAGE>
seeking any applicable exemption from the payment of any excise, sales, use,
gross receipts or similar tax with respect to the transfer of the Assets
hereunder.
6.2 Publicity. Seller and Costilo agree that they shall
not issue any publicity, release or announcement concerning the transactions
contemplated hereby. Buyer and each of its Affiliates shall have the right to
issue any publicity, releases or announcements that are required by law or that
any such party, in its reasonable discretion, deems appropriate. Buyer shall
provide to Seller a copy of each such publicity, release and/or announcement
promptly after its issuance.
6.3 Post-Closing Access. After the Closing, Seller shall
give, or cause to be given, to the officers, employees, attorneys, accountants
and other authorized representatives of Buyer (collectively, "Buyer's
Representatives"), reasonable access during normal business hours to all of the
tax and other records (including, without limitation, the right to make copies
and take extracts therefrom), plants, properties and personnel of Seller as
Buyer may from time to time reasonably request, in connection with Buyer's
conduct of its business, including, without limitation, its preparation of
financial statements and filing of required tax returns and reports and filings
by Buyer, Global or any of their respective Affiliates with the Securities and
Exchange Commission or any securities exchange or in connection with any of the
transactions contemplated by this Agreement or any of the other Purchase
Documents. Seller and Seller's Representatives shall furnish or cause to be
furnished such information and cooperation as may be reasonably requested by
Buyer in connection with the foregoing. Seller shall also cause to promptly be
prepared and promptly provide to Buyer, at Seller's expense, any financial
statements concerning Seller and its business as Buyer, Global or any of their
respective Affiliates may from time to time request in connection with any
filings required to be made by Buyer, Global or any of their respective
Affiliates with the Securities and Exchange Commission or any securities
exchange.
6.4 Non-Competition, Non-Solicitation and Non-Disclosure.
(a) Seller covenants and agrees that, for a
period of five (5) years following the Closing Date, it will not, directly or
indirectly, alone or as a partner, joint venturer, officer, director, employee,
lender, consultant, agent, independent contractor, stockholder or otherwise, or
knowingly permit any company or business organization directly or indirectly
controlled by Seller or any of its Affiliates to, engage in the Business or any
other business that is competitive with the business conducted by Buyer. The
passive ownership by Seller of not more than one percent (1%) of the shares of
stock of any corporation having a class of equity securities actively traded on
a national securities exchange or in the over-the-counter market shall not be
deemed, in and of itself, to violate the prohibitions of this paragraph. In
addition, Seller is contemporaneously herewith delivering to Buyer
non-disclosure agreements (the "Non-Disclosure Agreements") in favor of Buyer
from each of Seller's employees, other than Alex Spektor and Ori Pessach, the
form of which is annexed hereto as Exhibit A. Seller and Costilo each covenants
and agrees to use its best efforts to deliver to Buyer Non-Disclosure Agreements
executed by each of Alex Spektor and Ori Pessach within thirty (30) days
following the Closing.
-19-
<PAGE>
(b) Seller covenants and agrees that, for a
period of five (5) years following the Closing Date, it will not, directly or
indirectly, employ, hire, engage or be associated with, or attempt to employ,
hire, engage or be associated with, or knowingly permit any company or business
organization directly or indirectly controlled by Seller or any of its
Affiliates to employ, hire, engage or be associated with, or attempt to employ,
hire, engage or be associated with, any person who was employed by Seller during
the six (6) months prior to the Closing Date or is employed by Buyer at any time
after the Closing Date.
(c) Seller covenants and agrees that it will
not, at any time following the Closing Date, disclose, directly or indirectly,
or make available to any person, or in any manner use for its own benefit, any
confidential information or trade secrets relating to Seller, Buyer or the
Business, or any information concerning Seller's or Buyer's financial condition,
prospects, customers, licensees, suppliers, sources of leads and methods of
developing products, obtaining new business, manufacturing and distribution
methods or any other methods of doing and operating the Business, except to the
extent that such information is a matter of public knowledge or is required to
be disclosed by law (in which case prior to such disclosure the disclosing party
shall promptly provide prior written notice of such required disclosure to Buyer
in order to afford Buyer the opportunity to seek an appropriate protective order
preventing such disclosure).
(d) Seller acknowledges and agrees that a
breach by it of any of the provisions of this Section 6.4 will cause irreparable
harm and damage to Buyer and that, in the event of such breach, Buyer shall
have, in addition to any and all remedies at law, the right to an injunction,
specific performance or other equitable relief to prevent the violation of the
obligations of Seller hereunder, without the necessity of proving such
irreparable harm or damage or the inadequacy of remedies at law and without the
necessity of posting any bond.
(e) Seller acknowledges and agrees that each
provision of this Section 6.4 shall be treated as a separate and independent
clause, and the unenforceability by any one clause shall in no way impair the
enforceability of any of the other clauses herein. Furthermore, if one or more
of the provisions contained in this Section 6.4 shall for any reason be held to
be excessively broad as to geographical scope, duration, activity or otherwise
so as to be unenforceable at law, such provision or provisions shall be
construed by the appropriate judicial body by limiting and reducing it or them,
as the case may be, so as to be enforceable to the maximum extent compatible
with the applicable Law as it shall then appear.
-20-
<PAGE>
VII. CERTAIN EMPLOYEE MATTERS
7.1 Employment of Costilo. Contemporaneously herewith,
Buyer and Costilo are entering into an Employment Agreement, the form of which
is annexed hereto as Exhibit B (the "Employment Agreement"), pursuant to which
Costilo will be employed by Buyer following the Closing.
7.2 Severance Obligations. Seller shall terminate all of
its employees contemporaneous with the Closing. Seller shall be responsible for
and has fully paid, prior to the Closing, all Termination Amounts, including,
without limitation, all Severance Payments, if any, that shall have been payable
to all of Seller's past and present employees.
VIII. CLOSING DELIVERIES
8.1 Deliveries of Seller. Contemporaneously herewith or
prior hereto, Seller is delivering or has previously delivered to Buyer each of
the following documents:
(a) Opinion of Counsel. An opinion of HKG&V,
counsel to Seller and Costilo, dated as of the Closing Date, in form and
substance satisfactory to Buyer.
(b) Employment Agreement. The Employment
Agreement, executed by Costilo.
(c) Non-Disclosure Agreements. The
Non-Disclosure Agreements, executed by each of Seller's employees, other than
Costilo, Alex Spektor and Ori Pessach.
(d) Certificate of Secretary. A certificate of
the Secretary of Seller setting forth (i) a copy of the resolutions adopted by
its Board of Directors and shareholders approving the execution and delivery of
this Agreement and each of the other Purchase Documents to which it is a party
and the consummation of the transactions contemplated hereby and thereby, (ii)
Seller's certificate of incorporation, as amended to date, (iii) Seller's
by-laws, as amended to date, and (iv) the incumbency of Seller's officers and
including such officers' signatures.
(e) Corporate Records and Financial Statements.
Such books, records and financial statements of Seller as has been reasonably
requested by Buyer, including, without limitation, the financial statements
described in Section 4.4(a).
(f) Instruments of Transfer. General
assignments, bills of sale, consents and other instruments of transfer, in form
and substance satisfactory to Buyer, to vest in Buyer good and marketable right,
title and interest in the Assets, free and clear of all Liens.
-21-
<PAGE>
(g) Name Change. An amendment to Seller's
Certificate of Incorporation, changing Seller's name to a name not including the
words "Pro Notes" or any derivation thereof, and any other documents and
instruments necessary to effectuate the foregoing.
(h) Consents. Copies of consents from each
party listed on Schedule 4.3 hereto.
(i) Releases. A general release in favor of
Buyer and Global from each shareholder of Seller and from CaddTech Productivity,
Inc., a creditor of Seller.
(j) Disbursement Instructions. Irrevocable
written instructions to HKG&V with respect to the disbursement by HKG&V,
following the Closing, of the cash portion of the Purchase Price being delivered
to HKG&V contemporaneously herewith pursuant to Section 2.2(a) hereof.
8.2 Deliveries of Buyer. Contemporaneously herewith or
prior hereto, Buyer is delivering or has previously delivered to Seller each of
the following documents:
(a) Employment Agreement. The Employment
Agreement, executed by Buyer.
(b) Certificate of Secretary. A certificate of
the Secretary of Buyer setting forth (i) a copy of the resolutions adopted by
its Board of Directors and shareholders approving the execution and delivery of
this Agreement and each of the other Purchase Documents to which it is a party
and the consummation of the transactions contemplated hereby and thereby, (ii)
Buyer's certificate of incorporation, as amended to date, (iii) Buyer's by-laws,
as amended to date, and (iv) the incumbency of Buyer's officers and including
such officers' signatures.
(c) Instruments of Assumption. Assumptions and
other similar instruments of assignment, in form and substance satisfactory to
Seller, to evidence Buyer's assumption of the Assumed Liabilities.
IX. SURVIVAL AND INDEMNIFICATION
9.1 Survival of Representations and Warranties.
Notwithstanding any right of Buyer fully to investigate the affairs of Seller or
any other party and notwithstanding any knowledge of the facts determined or
determinable by Buyer pursuant to such investigation or right of investigation,
Buyer has the right to rely fully upon the representations, warranties,
covenants and agreements of Seller and Costilo contained in this Agreement and
the other Purchase Documents. All such representations, warranties, covenants
and agreements of Seller,
-22-
<PAGE>
Costilo and Buyer made in this Agreement and the other Purchase Documents or in
any certificate delivered pursuant hereto shall survive the execution and
delivery hereof and the Closing.
9.2 Indemnification by Seller and Costilo. Seller and
Costilo, jointly and severally, agree to indemnify, defend and hold Buyer and
its Affiliates harmless from and against any and all losses, diminution of
value, claims, demands, damages, costs and expenses (including, without
limitation, reasonable attorneys' fees and disbursements) of every kind, nature
and description (collectively, "Claims") based upon, arising out of or otherwise
in respect of (a) any inaccuracy in or any breach of any representation,
warranty, covenant or agreement of Seller or Costilo contained in this Agreement
or in any other Purchase Document, and (b) the Excluded Liabilities (including,
without limitation, Claims based upon, arising out of or otherwise relating to
(i) workmen's compensation, disability, discrimination, wage and hour and other
matters in respect of past or present employees of Seller and (ii) the operation
of the Business in respect of all periods on or prior to the Closing Date).
9.3 Indemnification by Buyer. Buyer agrees to indemnify,
defend and hold Seller and its Affiliates harmless from and against any and all
Claims based upon, arising out of or otherwise in respect of (a) any inaccuracy
in or any breach of any representation, warranty, covenant or agreement of Buyer
contained in this Agreement or in any other Purchase Document, and (b) any
failure to pay or fulfill any and all Assumed Liabilities in accordance with the
terms of this Agreement.
9.4 Notice and Defense of Third Party Claims. If any
claim, action, suit, investigation or proceeding shall be brought or asserted
under Section 9.2 or 9.3 against Buyer or any of its Affiliates or Seller or any
of its Affiliates, respectively (each an "Indemnified Person"), in respect of
which indemnity may be sought under either such Section from the relevant
indemnifying person (the "Indemnifying Person"), the Indemnified Person shall
give prompt written notice of such action, suit, investigation or proceeding to
the Indemnifying Person, who shall assume the defense thereof (including the
employment of counsel reasonably satisfactory to the Indemnified Person) and the
payment of all expenses related thereto; provided, however, that any delay or
failure to so notify the Indemnifying Person shall relieve the Indemnifying
Person of its obligations hereunder only to the extent, if at all, that the
Indemnifying Person is materially prejudiced by reason of such delay or failure.
The Indemnified Person shall have the right to employ separate counsel in any
such action, suit, investigation or proceeding and to participate in the defense
thereof, but the fees and disbursements of such separate counsel shall be borne
by the Indemnified Person unless both the Indemnified Person and the
Indemnifying Person are named as parties and the Indemnified Person shall in
good faith determine that representation by the same counsel is inappropriate
(in which later case the fees and disbursements of such separate counsel shall
be at the expense of the Indemnifying Person). In the event that the
Indemnifying Person, within ten (10) days after notice of any such action, suit,
investigation or proceeding, fails to assume the defense thereof, the
Indemnified Person shall have the right to undertake the defense, compromise or
settlement of such action, suit, investigation or proceeding for the account of
the Indemnifying Person, and all costs, fees and expenses thereof shall be
deemed Claims for which
-23-
<PAGE>
the Indemnifying Person shall be responsible. Anything in this Section to the
contrary notwithstanding, the Indemnifying Person shall not, without the
Indemnified Person's prior written consent, settle or compromise any action,
suit, investigation or proceeding or consent to the entry of any judgment or
order thereunder.
9.5 Right of Offset; Claims. Buyer shall have the right to
give notice of any and all Claims under this Agreement or any other Purchase
Document and to be reimbursed for the amount of any and all such Claims by
offsetting such amounts against any amounts payable by Buyer to Seller or
Costilo pursuant to this Agreement or any of the other Purchase Documents,
including, without limitation, any Earn-Out Payments to which Seller may
hereafter become entitled. Neither the giving of nor failure to give any such
notice of a Claim under this Agreement or any other Purchase Document nor the
offsetting of any amounts nor failure to offset any amounts in respect of any
Claim by Buyer, shall constitute an election of remedies nor limit Buyer in any
manner in the enforcement of any other remedies that may be available to it.
X. MISCELLANEOUS
10.1 Certain Definitions. As used in this Agreement, the
following terms have the following meanings:
(a) "Affiliate" with respect to any person or
entity, means and includes any person or entity directly, or through one or more
intermediaries, controlling, controlled by or under common control with such
person or entity; "control" means the possession, directly or indirectly, of the
power, by share ownership, contract or otherwise, to direct the management and
policies of a person or entity.
(b) "Environmental Claim" means any claim
alleging (i) any responsibility, liability or unlawful act or omission under any
Environmental Law (ii) any tortious act or omission or breach of contract
pertaining to any Environmental Substance, or (iii) any other violation or claim
under any Environmental Law or in respect of any Environmental Substance.
(c) "Environmental Law" means any applicable
Law pertaining to (i) any emission, discharge, release, runoff, disposal or
presence in the environment of any Environmental Substance, (ii) any cleanup,
containment, manufacturing, treatment, handling, transportation, storage or sale
of or other activity pertaining to any Environmental Substance, or (iii) any
other peril to public or occupational health or safety or to the Environment
that may be posed by an Environmental Substance.
(d) "Environmental Substance" means any toxic
substance, hazardous material, contaminant, waste, pollutant or other similar
product or substance that may be, or pose, a threat to public or occupational
health or safety or to the environment.
-24-
<PAGE>
(e) "Lien" means and includes any lien, pledge,
negative pledge, mortgage, security interest, claim, lease, charge, option,
restriction on use, right of first refusal, or other encumbrance of any kind or
nature whatsoever, and shall include, without limitation, with respect to real
property, any easement, restrictive covenant, encroachment or other defect.
(f) "Permitted Lien" means (i) carriers',
warehousemen's, mechanics', or other like Liens arising in the ordinary course
of business for sums not due and payable, (ii) with respect to real property,
easements, rights-of-way, restrictive covenants, encroachments, zoning and other
governmental ordinances and other like encumbrances incurred in the ordinary
course of business, none of which are substantial in amount or materially
detract from the value of such property or impair the present or anticipated
future use of such property, and (iii) Liens on real property for taxes not yet
due and payable or which are being contested in good faith by appropriate
proceedings.
(g) "Products" means any computer related
products designed, developed or manufactured by Buyer, including, without
limitation, any software products which comprise, contain or are derived from,
Seller's proprietary software existing or in the process of design or
development by Seller on the date hereof.
10.2 Notices. Any notice, request, demand or other
communication permitted or required to be given hereunder shall be in writing,
shall be sent by one of the following means to the addressee and shall be deemed
conclusively to have been given: (a) on the first business day following the day
timely deposited with Federal Express (or other equivalent national overnight
carrier) or United States Express Mail, with the cost of delivery prepaid; (b)
on the fifth business day following the day duly sent by certified or registered
United States mail, postage prepaid and return receipt requested; or (c) when
otherwise actually delivered to the addressee, at the following addresses:
(i) if to Seller or Costilo:
c/o Alan Costilo, D.C.
1544 Magee Avenue
Philadelphia, Pennsylvania 19149
with a copy to:
Heller, Kapustin Gershman & Vogel
486 Norristown Road
Suite 230
Blue Bell, Pennsylvania 19422
Attention: Warren Vogel, Esq.
-25-
<PAGE>
(ii) if to Buyer:
ProNotes Acquisition Corp.
c/o Global Intellicom, Inc.
747 Third Avenue
New York, New York 10017
Attention: Johan de Muinck Keizer, Esq.,
General Counsel
with a copy to:
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Attention: Charles P. Greenman, Esq.
Any party may, by notice given in accordance with this Section 10.2 to the other
party, designate another address or person for receipt of notices hereunder.
Copies may be sent by regular first-class mail, postage prepaid, to such
person(s) as a party may direct from time to time by notice to the others, but
failure or delay in sending copies shall not affect the validity of any such
notice, request, demand or other communication so given to a party.
10.3 Brokers. Seller and Costilo, jointly and severally,
agree that, except as expressly provided in Section 1.3(b) hereof, they shall
(a) solely be responsible for and shall pay the fees, commissions and expenses
of each broker, finder, investment banker and other intermediary in connection
with this Agreement and the transactions contemplated hereby, including, without
limitation, the fees, commissions and expenses of Jack Land and Larry Fox and
their respective Affiliates, and (b) indemnify Buyer and its Affiliates in
accordance with Article IX hereof with respect to all such fees, commissions and
expenses.
10.4 Entire Agreement. This Agreement (including the
Schedules and Exhibits annexed hereto or referred to herein) and the other
Purchase Documents executed in connection with the consummation of the
transactions contemplated hereby contain the entire agreement between the
parties with respect to the transfer of the Assets to Buyer and the assumption
by Buyer of the Assumed Liabilities and supersedes all prior agreements, written
or oral, with respect thereto. 10.5 Waivers and Amendments; Preservation of
Remedies. This Agreement and the other Purchase Documents may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by all parties to this Agreement or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any such right,
power or privilege, or any single or partial exercise of any such right, power
or privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege. The rights and remedies herein provided are
-26-
<PAGE>
cumulative and shall not preclude any party from seeking any other remedy
available, whether pursuant to applicable law or otherwise.
10.6 No Third-Party Beneficiaries. Except as expressly
contemplated hereby, this Agreement and the other Purchase Documents are
intended for the exclusive benefit of the parties hereto and shall not be
enforceable by an other person or entity.
10.7 Governing Law. This Agreement and the other Purchase
Documents shall be governed by, and construed and enforced in accordance, with
the laws of the State of New York, without regard to principles of conflicts or
choice of law (or any other law that would make the laws of any state other than
the State of New York applicable hereto).
10.8 Bulk Transfer Laws. Buyer and Seller hereby waive
compliance with all applicable bulk sales and similar laws. Seller and Costilo,
jointly and severally, agree to bear all costs and expenses associated with any
and all claims, losses, liabilities, costs and expenses that Seller or Buyer may
incur as a consequence of any bulk transfer laws, including the waiver of
compliance therewith.
10.9 Binding Effect; Assignment; Parties in Interest.
(a) Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assignable by any of the
parties hereto without the prior written consent of the other party, except that
the rights of Buyer hereunder may be assigned, without the consent of the other
parties hereto, to any corporation all of the outstanding capital stock of which
is owned or controlled, directly or indirectly, by Global; provided that (i) the
assignee shall assume in writing all of Buyer's obligations hereunder, and (ii)
Buyer shall not be released from any of its obligations hereunder by reason of
such assignment. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective permitted successors and assigns.
Nothing in this Agreement is intended to confer, expressly or by implication,
upon any other person any rights or remedies under or by reason of this
Agreement.
(b) Notwithstanding the foregoing, Buyer
(including each subsequent assignee of Buyer) shall have the right to assign any
or all of their rights and obligations hereunder to any other person who
acquires all or substantially all of the assets and business of Buyer (or a
subsequent assignee of Buyer); provided that the assignor shall not be released
from any of its obligations hereunder by reason of any such assignment.
(c) Notwithstanding any provision of this
Agreement to the contrary, Seller and Costilo each hereby acknowledges and
agrees that all of the covenants, representations, warranties and indemnities of
Seller and Costilo under this Agreement, and under any other Purchase Document,
may be collaterally assigned to any and all lenders to Buyer or Global or any of
their respective affiliates, any and all of whom may enforce their rights and
remedies in
-27-
<PAGE>
connection with any such collateral assignment or realization thereon to the
extent provided in the applicable security agreements and other debt instruments
or at law or in equity.
10.10 Counterparts. This Agreement and the other Purchase
Documents may be executed by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same instrument.
10.11 Further Assurances. Seller and Costilo shall, at the
request of Buyer, at any time and from time to time following the Closing,
promptly execute and deliver, or cause to be executed and delivered, to Buyer
all such further documents and instruments and take all such further action as
may be reasonably necessary or appropriate to more effectively transfer to
Buyer, or to perfect or record Buyer's title to or interest in, or to enable
Buyer to use, the Assets and the Business or otherwise to confirm or carry out
the provisions and intent of this Agreement and the other Purchase Documents.
Furthermore, Seller and Costilo shall use their best efforts to promptly obtain
any and all consents, approvals and waivers necessary to permit the assignment
to, and assumption by, Buyer of all of the Assumed Contracts with respect to
which a third-party consent, approval or waiver is required and has not been
obtained prior to the Closing.
10.12 Schedules. All Schedules referred to herein are
hereby incorporated in and made a part of this Agreement as if set forth in full
herein.
10.13 Captions. All section titles or captions contained
in this Agreement or in any Schedule annexed hereto or referred to herein, and
the table of contents to this Agreement, are for convenience only, shall not be
deemed a part of this Agreement and shall not affect the meaning or
interpretation of this Agreement.
10.14 Guarantee. Global, as the direct or indirect owner
of all of the issued and outstanding shares of capital stock of Buyer, does
hereby guarantee to Seller the payment and performance by Buyer of its
obligation to pay to Seller the Earn-Out Deficiency Amount in accordance with
the provisions of Section 2.2(d) hereof and that such guarantee shall constitute
a guarantee of payment and not a guarantee of collection; provided, that Global
shall be entitled to assert, and Global's liabilities and obligations hereunder
shall be subject to, all of Buyer's defenses and other rights under this
Agreement, the other Purchase Documents (as defined in the Agreement) and
applicable law and all defenses, counterclaims and discharges, whether legal or
equitable, of a surety or guarantor under applicable law.
-28-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement or
caused this Agreement to be executed by their respective duly authorized
officers on the date first written above.
PRO NOTES, INC.
By:___________________________________
Name:
Title:
______________________________________
ALAN COSTILO
PRONOTES ACQUISITION CORP.
By:___________________________________
Name:
Title:
ACCEPTED AND AGREED TO, solely with respect to Section 10.14 hereof (and
Sections 10.2, 10.4 through 10.7, 10.9 through 10.11 and 10.13 as they relate to
such Section):
GLOBAL INTELLICOM, INC.
By:___________________________________
Name:
Title:
-29-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000946355
<NAME> GLOBAL INTELLICOM, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 944,881
<SECURITIES> 0
<RECEIVABLES> 9,710,809
<ALLOWANCES> (231,333)
<INVENTORY> 8,371,074
<CURRENT-ASSETS> 2,972,603
<PP&E> 1,577,906
<DEPRECIATION> 283,127
<TOTAL-ASSETS> 27,594,822
<CURRENT-LIABILITIES> 17,091,114
<BONDS> 0
0
6,808
<COMMON> 33,480
<OTHER-SE> 8,056,765
<TOTAL-LIABILITY-AND-EQUITY> 27,594,822
<SALES> 9,619,408
<TOTAL-REVENUES> 9,619,408
<CGS> 8,191,726
<TOTAL-COSTS> 9,962,933
<OTHER-EXPENSES> 288,774
<LOSS-PROVISION> (632,299)
<INTEREST-EXPENSE> 288,774
<INCOME-PRETAX> (632,299)
<INCOME-TAX> (252,920)
<INCOME-CONTINUING> (379,379)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (379,379)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
