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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 30, 1998
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GLOBAL INTELLICOM, INC.
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(Exact name of registrant as specified in its charter)
NEVADA 0-26684 13-3797104
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(State or other jurisdiction (Commission file number) (I.R.S. Employer
of incorporation) Identification Number)
747 THIRD AVENUE, NEW YORK, NEW YORK 10017
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212)750-3772
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ITEM 5. OTHER EVENTS.
ADDITIONAL FINANCING
On April 30, 1998, the Company sold and issued $2,000,000 principal amount
of its 6% Convertible Debentures due April 30, 2001 (the "Debentures"), to an
institutional investor in a private placement transaction, receiving net
financing proceeds of approximately $1,780,000 after transaction costs including
payment of a finders fee. Such financing proceeds are being used for the
carrying of inventory and receivables, for reduction of accounts payable and for
other working capital purposes.
The Debentures are subordinated to the Company's indebtedness (i) to the
Company's principal floorplan financing institution and receivables factor and
(ii) to existing or future indebtedness of the Company to a banking or other
commercial lending institution. The Debentures bear interest at the rate of 6%
per annum, payable quarterly commencing June 30, 1998. At the option of the
Company, such interest is payable in the form of shares of Common Stock, subject
to certain conditions, including but not limited to the registration of such
shares for public resale under an effective Company registration statement
covering such shares ("Registration Statement"), or the eligibility of such
shares for public distribution without volume limitations as permitted under
Rule 144 (k) of the Securities and Exchange Commission, and the continuation of
the present listing of the Company's Common Stock on the Nasdaq SmallCap Market,
all as set forth in the relevant agreements between the Company and the
institutional investor, included as exhibits to this report.
Beginning at the earlier of 90 days from issuance or the effective date of
a Registration Statement, the Debentures are convertible into Common Stock at a
conversion price equal to the lower of (i) 110% of the average closing bid price
for the five trading days immediately preceding April 30, 1998 or (ii) 80% of
the average of the five lowest sales prices of the Common Stock during the 25
days preceding notice of conversion. If certain events occur, such as the
failure of the Company to timely file and cause to become effective a
Registration Statement covering the conversion shares, or the suspension of
trading of Common Stock for more than three days, such conversion price is
subject to reduction at the rate of 2% per month, or the Company may be required
to pay a cash penalty of 2% per month.
If an event of default ("Event of Default") occurs and is not cured, the
Debenture holder may demand, and Company will be obligated to pay, an amount
equal to the principal amount of and interest owed on the Debentures, divided by
the lower of the conversion price on the day of demand or day of payment,
multiplied by the price of Common Stock on the date of demand or the date of
payment, whichever is higher. An Event of Default is defined, among other
things, as a failure to pay interest or principal when due, a breach of
material terms of the Debentures or the related financing agreements, a
bankruptcy, insolvency or reorganization, a default under any other credit,
mortgage or financing facility involving Company indebtedness exceeding
$100,000, a delisting or suspension
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of trading of the Common Stock on Nasdaq for more than four days or a failure to
obtain an effective Registration Statement within 180 days after April 30, 1998.
In connection with the sale of the Debentures, the Company has granted
Encore Capital Management, L.L.C., a right of first refusal with respect to any
proposed sale by the Company during the next 180 days of any of its equity
securities at a price less than the then current market price. In addition, the
Company has issued five-year warrants to the purchaser of the Debentures,
entitling the holder to purchase 377,358 shares of Common Stock at an exercise
price of $2.24 per share and to a finder to purchase 60,000 shares at the same
price. The holders of the warrants have various rights to require the Company
to include shares of Common Stock issuable upon conversion of the Debentures
or exercise of the warrants in a Registration Statement.
OTHER DEVELOPMENTS - NOTIFICATION FROM NASDAQ
The Company received a letter from The Nasdaq Stock Market, Inc., notifying
it that the Company is not presently meeting minimum listing requirements of (i)
net tangible assets of $2,000,000, (ii) market capitalization of at least $35
million or (iii) net income of at least $500,000 in the most recently completed
fiscal year or in two of the last three most recently completed fiscal years.
The letter requested the Company to present, by May 11, 1998, a proposal and a
timetable for achieving compliance with such continued listing requirements.
The Company responded on May 11, 1998 with a proposal now being reviewed by the
Nasdaq staff. The Company intends to supplement the proposal with a more
detailed business plan by May 30, 1998. There can be no assurance that the
Company's plan and timetable will be acceptable to Nasdaq or that the elements
of such plan, if acceptable, will in fact be realized as contemplated.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) The following exhibits are included with this Report on Form 8-K in
accordance with the provisions of Item 601 of Regulation S-K:
10.01 Convertible Debenture Purchase Agreement.
10.02 Form of 6% Convertible Debenture due April 30, 2001.
10.03 Registration Rights Agreement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: May 14, 1998
GLOBAL INTELLICOM, INC.
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(Registrant)
By:
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N. Norman Muller, Chairman and
Chief Executive Officer
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Exhibit 10.01
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT (this "Agreement"), dated as
of April 30, 1998, between Global Intellicom, Inc., a Nevada corporation (the
"Company"), and JNC Opportunity Fund Ltd., a Cayman Islands corporation (the
"Purchaser").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchaser and the
Purchaser desires to purchase an aggregate principal amount of $2,000,000 of the
Company's 6% Convertible Debentures, due April 30, 2001 (the "Debentures"),
which are convertible into shares of the Company's common stock, .01 par value
per share (the "Common Stock").
IN CONSIDERATION of the mutual covenants and agreements set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF CONVERTIBLE DEBENTURES
1.1 The Closing.
(a) The Closing. (i) Subject to the terms and conditions set
forth in this Agreement, the Company shall issue and sell to the Purchaser and
the Purchaser shall purchase the Debentures for an aggregate purchase price of
$2,000,000. The closing of the purchase and sale of the Debentures (the
"Closing") shall take place at the offices of Robinson Silverman Pearce Aronsohn
& Berman LLP (the "Escrow Agent"), 1290 Avenue of the Americas, New York, New
York 10104, immediately following the execution hereof, or such later date as
the parties shall agree, but in any event within 1 Business Day (as defined
below) following such execution . The date of the Closing is hereinafter
referred to as the "Closing Date."
(ii) Prior to the Closing, the parties shall deliver
or shall cause to be delivered to the Escrow Agent such items as are required to
be delivered by them in accordance with and subject to the terms and conditions
of the Escrow Agreement dated as of the date hereof, by and among the Company,
the Purchaser and the Escrow Agent, in the form of Exhibit E (the "Escrow
Agreement"), including the following: (A) the Company shall deliver (1) the
Debentures registered in the name of the Purchaser, (2) a common stock purchase
warrant, in the form of Exhibit B, registered in the name of the Purchaser (the
"Warrant"), and (3) the legal opinion of Rosner, Bresler, Goodman & Unterman,
LLP, substantially in the form of Exhibit D (the "Legal Opinion"); (B) the
Purchaser shall deliver $2,000,000 in United States dollars in immediately
available funds by wire transfer to an account designated in writing by the
Company for such purpose, less the fees contemplated in Section 4.1 hereof; and
(C) each party hereto shall deliver the Registration Rights Agreement, dated the
date hereof, between the Company and the Purchaser, in the form of Exhibit C
(the "Registration Rights Agreement") and executed originals of all other
instruments, agreements and certificates as are required to be delivered
hereunder by or on their behalf at the Closing.
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1.2 Form of Debentures. The Debentures shall be in the form of Exhibit
A. For purposes of this Agreement, "Original Issue Date," "Trading Day" and "Per
Share Market Value" shall have the meanings set forth in the Debentures; and
"Market Price" as at any date shall mean the average Per Share Market Value for
the five (5) Trading Days immediately preceding such date, and "Business Day"
shall mean any day except Saturday, Sunday and any day which shall be a federal
legal holiday or a day on which banking institutions in the State of New York
are authorized or required by law or other governmental action to close.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The
Company hereby makes the following representations and warranties to the
Purchaser:
(a) Organization and Qualification. The Company is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the State of Nevada, with the requisite corporate power and authority to
own and use its properties and assets and to carry on its business as currently
conducted. The Company has no subsidiaries other than as set forth in Schedule
2.1(a) (collectively the "Subsidiaries"). Except as set forth in Schedule
2.1(a), each of the Subsidiaries is a corporation, duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the full corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Except as set forth in Schedule 2.1(a), each of the
Company and the Subsidiaries is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate, (x) adversely
affect the legality, validity or enforceability of the Securities (as defined
below) or any of this Agreement, the Debentures, the Warrant, the Escrow
Agreement or the Registration Rights Agreement (collectively, the "Transaction
Documents"), (y) have or result in a material adverse effect on the results of
operations, assets, prospects, or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole, or (z) adversely impair the
Company's ability to perform fully on a timely basis its obligations under any
of the Transaction Documents (any of (x), (y) or (z), being a "Material Adverse
Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents, and otherwise to carry out
its obligations thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company. Each of the Transaction Documents has been duly executed by the Company
and, when delivered in accordance with the terms hereof, will constitute the
valid and binding obligation of the Company enforceable against the Company
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in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of,
creditors' rights and remedies or by other equitable principles of general
application. Neither the Company nor any Subsidiary is in violation of any of
the provisions of its respective certificate of incorporation, by-laws or
other charter documents.
(c) Capitalization. The number of authorized, issued and
outstanding capital stock of the Company is set forth in Schedule 2.1(c). No
shares of Common Stock are entitled to preemptive or similar rights, nor is any
holder of the Common Stock entitled to preemptive or similar rights arising out
of any agreement or understanding with the Company by virtue of any of the
Transaction Documents. Except as disclosed in Schedule 2.1(c), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or, except as a result of
the purchase and sale of the Debentures and the Warrant, securities, rights or
obligations convertible into or exchangeable for, or giving any person any right
to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock. To
the knowledge of the Company, except as specifically disclosed in the SEC
Documents (as defined below) or Schedule 2.1(c), no Person or group of related
Persons beneficially owns (as determined pursuant to Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) or
has the right to acquire by agreement with or by obligation binding upon the
Company beneficial ownership of in excess of 5% of the Common Stock. A "Person"
means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
(d) Issuance of the Debentures and the Warrant. The Debentures
and the Warrant are duly authorized, and, when issued and paid for in accordance
with the terms hereof, shall have been validly issued, fully paid and
nonassessable, free and clear of all liens, encumbrances and rights of first
refusal of any kind (collectively, "Liens"). The Company has duly reserved for
issuance an adequate number of authorized shares of Common Stock to enable it to
perform its conversion, exercise and other obligations under this Agreement, the
Warrant and the Debentures. Such number of reserved and available shares of
Common Stock is not less than the sum of (i) 200% of the number of shares of
Common Stock which would be issuable upon conversion in full of the Debentures,
assuming such conversion were effected on the Original Issue Date or the Filing
Date (as defined in the Registration Rights Agreement), whichever yields a lower
Conversion Price, (ii) the number of shares of Common Stock issuable upon
exercise in full of the Warrant, and (iii) the number of shares Common Stock
which would be issuable upon payment of interest on the Debentures, assuming
each Debenture is outstanding for three years and all interest is paid in shares
of Common Stock. All such authorized shares of Common Stock shall be duly
reserved for such issuance to the holders of such Debentures and Warrant. The
shares of Common Stock issuable upon conversion of the Debentures, as payment of
interest thereon, or upon exercise of the Warrant are collectively referred to
herein as the "Underlying Shares." The Debentures, the Warrant and
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Underlying Shares are, collectively, the "Securities." When issued in accordance
with the Debentures, and upon exercise of the Warrant in accordance with their
terms, the Underlying Shares shall have been duly authorized, validly issued,
fully paid and nonassessable, free and clear of all Liens.
(e) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of its certificate of incorporation, bylaws or other
charter documents (each as amended through the date hereof), or (ii) subject to
obtaining the consents referred to in Section 2.1(f), conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument (evidencing a Company debt or otherwise) to which the Company is a
party or by which any property or asset of the Company is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company is subject (including Federal and state securities laws and
regulations), or by which any property or asset of the Company is bound or
affected, except in the case of each of clauses (ii) and (iii), as could not,
individually or in the aggregate, have or result in a Material Adverse Effect.
The business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental authority, except as set in Schedule
2.1(e) and for violations which, individually or in the aggregate, could not
have or result in a Material Adverse Effect.
(f) Consents and Approvals. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any court or other
Federal, state, local or other govern mental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filing of a an amendment to the
Company's registration statement on Form S-3 as filed with the Securities and
Exchange Commission (the "Commission") on March 19, 1998 (the "March
Registration Statement") or a new Registration Statement (as defined in the
Registration Rights Agreement) with the Commission, covering the resale of the
Underlying Shares pursuant to the Registration Rights Agreement (the "Underlying
Shares Registration Statement"), (ii) the application(s) to the Nasdaq SmallCap
Market (the "NASDAQ") for the listing of the Underlying Shares with the NASDAQ
(and with any other national securities exchange or market on which the Common
Stock is then listed), and (iii) in all other cases where the failure to obtain
such consent, waiver, authorization or order, or to give such notice or make
such filing or registration could not have or result in, individually or in the
aggregate, a Material Adverse Effect (together with the consents, waivers,
authorizations, orders, notices and filings referred to in Schedule 2.1(f), the
"Required Approvals").
(g) Litigation; Proceedings. Except as specifically disclosed
in the SEC Documents (as hereinafter defined), there is no action, suit, notice
of violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the
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Company or any of its Subsidiaries or any of their respective properties before
or by any court, governmental or administrative agency or regulatory authority
(Federal, state, county, local or foreign) which (i) adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) could, individually or in the aggregate,
have or result in a Material Adverse Effect.
(h) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of (and no event has occurred
which has not been waived which, with notice or lapse of time or both, would
result in a default by the Company or any Subsidiary under), nor has the Company
or any Subsidiary received notice of a claim that it is in default under or that
it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound, (ii) is in violation of any order of any court, arbitrator
or governmental body, or (iii) is in violation of any statute, rule or
regulation of any governmental authority, except as set forth in Schedule 2.1(h)
and as could not individually or in the aggregate, have or result in a Material
Adverse Effect.
(i) Schedules. The Schedules to this Agreement furnished by or
on behalf of the Company do not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
made therein not misleading.
(j) Private Offering. Assuming the accuracy of the
representations and warranties of the Purchaser set forth in Sections
2.2(b)-(f), the offer, issuance and sale of the Securities to the Purchaser as
contemplated hereby are exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"). Neither the Company
nor any Person acting on its behalf has taken or will take any action which
might subject the offering, issuance or sale of the Securities to the
registration requirements of the Securities Act.
(k) SEC Documents; Financial Statements. The Company has filed
all reports required to be filed by it under the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the three years preceding the
date hereof (or such shorter period as the Company was required by law to file
such material) (the foregoing materials, including the March Registration
Statement being collectively referred to herein as the "SEC Documents" and,
together with the Schedules to this Agreement the "Disclosure Materials") on a
timely basis or has received a valid extension of such time of filing and except
for the late filing of the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, has filed any such SEC Documents prior to the
expiration of any such extension. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All material agreements to which the Company is a party or to which
the property or assets of the Company are subject have been filed as exhibits to
the SEC Documents as required. The financial statements of the Company included
in the SEC
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Documents comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements were
prepared by the Company's independent certified public accountants in accordance
with generally accepted accounting principles applied on a consistent basis
("GAAP") during the periods involved, except as may be otherwise specified in
such financial statements or the notes thereto, and fairly present in all
material respects the financial position of the Company as of and for the dates
thereof and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial, year-end
audit adjustments. Since December 31, 1997, except as specifically disclosed in
the SEC Documents, (a) there has been no event, occurrence or development that
has had or that could have or result in a Material Adverse Effect, (b) the
Company has not incurred any liabilities (contingent or otherwise) other than
(x) liabilities incurred in the ordinary course of business consistent with past
practice and (y) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP, (c) the Company has not altered its
method of accounting or the identity of its auditors and (d) the Company has not
declared or made any payment or distribution of cash or other property to its
stockholders or officers or directors (other than in compliance with existing
Company stock option plans) with respect to its capital stock, or purchased,
redeemed (or made any agreements to purchase or redeem) any shares of its
capital stock. The Company last filed audited financial statements with the
Commission on April 24, 1998, and has not received any comments from the
Commission in respect thereof.
(l) Investment Company. The Company is not, and is not an
Affiliate (as defined in Rule 405 under the Securities Act) ) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(m) Certain Fees. Except for certain fees payable by the
Company to Wharton Capital Partners, Ltd., no fees or commissions will be
payable by the Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, or bank with respect to the transactions
contemplated by this Agreement. The Purchaser shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement. The Company
shall indemnify and hold harmless the Purchaser, its employees, officers,
directors, agents, and partners, and their respective Affiliates, from and
against all claims, losses, damages, costs (including the costs of preparation
and attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as such fees and expenses are incurred.
(n) Solicitation Materials. The Company has not (i)
distributed any offering materials in connection with the offering and sale of
the Securities, other than the Disclosure Materials and any amendments and
supplements thereto, or (ii) solicited any offer to buy or sell the Securities
by means of any form of general solicitation or advertising.
(o) Exclusivity. The Company shall not issue and sell the
Debentures to any Person other than the Purchaser other than with the specific
prior written consent of the Purchaser.
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(p) Seniority. Except as set forth in Schedule 2.1(p), no
indebtedness of the Company is senior to the Debentures in right of payment,
whether with respect to interest, damages or upon liquidation or dissolution, or
otherwise.
(q) Patents and Trademarks. The Company has, or has rights to
use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and rights (collectively, the
"Intellectual Property Rights") which are necessary for use in connection with
its business, and which the failure to so have would have a Material Adverse
Effect. To the best knowledge of the Company, there is no existing infringement
by another Person of any of the Intellectual Property Rights.
(r) Listing and Maintenance Requirements Compliance. Except as
set forth in Schedule 2.1(r), the Company has not in the two years preceding the
date hereof received notice (written or oral) from the NASDAQ or any other stock
exchange, market or trading facility on which the Common Stock is or has been
listed (or on which it has been quoted) to the effect that the Company is not in
compliance with the listing or maintenance requirements of such exchange or
market. The Company has provided the Purchaser with true and complete copies of
all such written notices and summaries of all such written notices. Except as
set forth in Schedule 2.1(r), the Company is in compliance with all such
maintenance requirements.
(s) Registration Rights; Rights of Participation. Except as
listed in the March Registration Statement or as described on Schedule 6(b) to
the Registration Rights Agreement, (i) the Company has not granted or agreed to
grant to any Person any rights (including "piggy-back" registration rights) to
have any securities of the Company registered with the Commission or any other
governmental authority which has not been satisfied and (ii) no Person, has any
right of first refusal, preemptive right, right of participation, or any similar
right to participate in the transactions contemplated by the Transaction
Documents.
(t) Regulatory Permits. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
Federal, state or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Documents, except where the
failure to possess such permits could not, individually or in the aggregate,
have or result in a Material Adverse Effect ("Material Permits"), and neither
the Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
(u) Disclosure. The Company confirms that it has not provided
the Purchaser or its agents or counsel with any information that constitutes or
might constitute material non-public information. The Company understands and
confirms that the Purchaser shall be relying on the foregoing representations in
effecting transactions in securities of the Company.
2.2 Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Company as follows:
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(a) Organization; Authority. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation with the requisite corporate power and
authority, to enter into and to consummate the transactions contemplated by the
Transaction Documents and otherwise to carry out its obligations thereunder. The
purchase by the Purchaser of the Securities hereunder has been duly authorized
by all necessary action on the part of the Purchaser. Each of this Agreement,
the Registration Rights Agreement and the Escrow Agreement has been duly
executed and delivered by the Purchaser and constitutes the valid and legally
binding obligation of the Purchaser, enforceable against it in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors' rights and
remedies or by other equitable principles of general application.
(b) Investment Intent. The Purchaser is acquiring the
Securities for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof or
interest therein, without prejudice, however, to the Purchaser's right, subject
to the provisions of this Agreement and the Registration Rights Agreement, at
all times to sell or otherwise dispose of all or any part of such Securities
pursuant to an effective registration statement under the Securities Act and in
compliance with applicable state securities laws or under an exemption from such
registration.
(c) Purchaser Status. At the time the Purchaser was offered
the Debentures and the Warrant, it was, and at the date hereof, it is, and at
each exercise date under the Warrant, it will be, an "accredited investor" as
defined in Rule 501(a) under the Securities Act.
(d) Experience of the Purchaser. The Purchaser either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.
(e) Ability of the Purchaser to Bear Risk of Investment. The
Purchaser is able to bear the economic risk of an investment in the Securities
and, at the present time, is able to afford a complete loss of such investment.
(f) Access to Information. The Purchaser acknowledges receipt
of the Disclosure Materials and further acknowledges that it has reviewed the
Disclosure Materials and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information
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contained in the Disclosure Materials. The Purchaser acknowledges that, in
making the decision to purchase the Debentures, it has relied solely upon the
Disclosure Materials, the representations, warranties and agreements set forth
in the Transaction Documents and the independent investigations made by it and
not upon any oral statements made by the Company or any officer or other
representative thereof.
(g) General Solicitation. The Purchaser is not purchasing the
Debentures as a result of or subsequent to any advertisement, article, notice or
other communication published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar.
(h) Reliance. The Purchaser understands and acknowledges that
(i) the Securities are being offered and sold to it without registration under
the Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and truth
fulness of, the foregoing representations and the Purchaser hereby consents to
such reliance.
(i) Organization. The Purchaser has not been organized or
recapitalized specifically for the purpose of purchasing the Securities.
The Company acknowledges and agrees that the Purchaser makes
no representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) Securities may only be disposed pursuant
to an effective registration statement under the Securities Act, to the Company
or pursuant to an available exemption from or in a transaction not subject to
the registration requirements of the Securities Act. In connection with any
transfer of Securities other than pursuant to an effective registration
statement or to the Company, except as otherwise set forth herein, the Company
may require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration under the Securities Act. Notwithstanding
the foregoing, the Company hereby consents to and agrees to register on the
books of the Company and with any transfer agent for the securities of the
Company any transfer of Securities by the Purchaser to an Affiliate of the
Purchaser, or any transfer among any such Affiliates, provided that transferee
certifies to the Company that it is an "accredited investor" as defined in Rule
501(a) under the Securities Act and that it is acquiring the Securities solely
for investment purposes. Any such transferee shall agree in writing to be bound
by the terms of this Agreement and shall have the rights of a Purchaser under
this Agreement and the Registration Rights Agreement.
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(b) The Purchaser agrees to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS.
[FOR DEBENTURES ONLY] THIS CONVERTIBLE DEBENTURE IS SUBJECT TO
CERTAIN RESTRICTIONS ON CONVERSION SET FORTH IN SECTION 3.8 OF A
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT, DATED AS OF APRIL 30, 1998,
BETWEEN GLOBAL INTELLICOM, INC. AND THE ORIGINAL HOLDER HEREOF. A COPY
OF THAT AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF GLOBAL
INTELLICOM, INC.
Underlying Shares shall not contain the legend set forth above
nor any other legend if the conversion of Debentures, the payment of interest
thereon, exercise of the Warrant or other issuances of Underlying Shares as
contemplated hereby or by the Debentures occurs at any time while an Underlying
Shares Registration Statement is effective under the Securities Act or in the
event there is not an effective Underlying Shares Registration Statement at such
time, if in the opinion of counsel to the Company such legend is not required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission). The
Company shall cause its counsel to issue the Transfer Agent instructions
attached hereto as Exhibit E to the Company's transfer agent on the day that the
Underlying Shares Registration Statement is declared effective by the
Commission. The Company agrees that it will provide the Purchaser, upon request,
with a certificate or certificates representing Underlying Shares, free from
such legend at such time as such legend is no longer required hereunder. The
Company may not make any notation on its records or give instructions to any
transfer agent of the Company which enlarge the restrictions of transfer set
forth in this Section.
3.2 Acknowledgment of Dilution. The Company acknowledges that the
issuance of the Underlying Shares upon (i) conversion of the Debentures and
payment of interest thereon in accordance with the terms of the Debentures and
(ii) exercise of the Warrant may result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain market conditions.
The Company further acknowledges that its obligation to issue Underlying Shares
upon (x) conversion of the Debentures and payment of interest thereon in
accordance with the terms of
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the Debentures, and (y) exercise of the Warrant is unconditional and absolute,
subject to the limitations set forth herein in the Debentures or pursuant to the
Warrant, regardless of the effect of any such dilution.
3.3 Furnishing of Information. As long as the Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act. As long as the Purchaser owns Securities, if
the Company is not required to file reports pursuant to such sections, it will
prepare and furnish to the Purchaser and make publicly available in accordance
with Rule 144(c) promulgated under the Securities Act annual and quarterly
financial statements, together with a discussion and analysis of such financial
statements in form and substance substantially similar to those that would
otherwise be required to be included in reports required by Section 13(a) or
15(d) of the Exchange Act, as well as any other information required thereby, in
the time period that such filings would have been required to have been made
under the Exchange Act. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, all to the
extent required from time to time to enable such Person to sell Underlying
Shares without registration under the Securities Act within the limitation of
the exemptions provided by Rule 144 promulgated under the Securities Act,
including the legal opinion referenced above in this Section. Upon the request
of any such Person, the Company shall deliver to such Person a written
certification of a duly authorized officer as to whether it has complied with
such requirements.
3.4 Blue Sky Laws. In accordance with the Registration Rights
Agreement, the Company shall qualify or exempt the issuance and sale of the
Underlying Shares under the securities or Blue Sky laws of such jurisdictions as
the Purchaser may reasonably request and shall continue such qualification or
exemption at all times until the Purchaser notifies the Company in writing that
it no longer owns Securities; provided, however, that neither the Company nor
its Subsidiaries shall be required in connection therewith to qualify as a
foreign corporation where they are not now so qualified or to take any action
that would subject the Company to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
3.5 Integration. The Company shall not, and shall use its best efforts
to ensure that, no Affiliate shall, sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in Section 2
of the Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchaser.
3.6 Increase in Authorized Shares. At such times as the Company would
be, if a notice of conversion or exercise (as the case may be) were to be
delivered on such date, precluded from (a) converting 200% of the full
outstanding principal amount of Debentures (and paying any earned and unpaid
interest in respect thereof in shares of Common Stock) that remain unconverted
at such date or (b) honoring the exercise in full of the Warrant due to the
unavailability of a sufficient number
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of shares of authorized but unissued or reserved Common Stock, the Board of
Directors of the Company shall promptly (and in any case, within 30 Business
Days from such date) prepare and mail to the stockholders of the Company proxy
materials requesting authorization to amend the Company's Certificate of
Incorporation to increase the number of shares of Common Stock which the Company
is authorized to issue to at least such number of shares as reasonably requested
by the Purchaser in order to provide for such number of authorized and unissued
shares of Common Stock to enable the Company to comply with its conversion,
exercise and reservation of shares obligations as set forth in this Agreement,
the Debentures and the Warrant. In connection therewith, the Board of Directors
shall (a) adopt proper resolutions authorizing such increase, (b) recommend to
and otherwise use its best efforts to promptly and duly obtain stockholder
approval to carry out such resolutions (and hold a special meeting of the
stockholders no later than the 60th day after delivery of the proxy materials
relating to such meeting) and (c) within 5 business Days of obtaining such
stockholder authorization, file an appropriate amendment to the Company's
Certificate of Incorporation to evidence such increase.
3.7 Listing and Reservation of Underlying Shares. (a) The Company shall
(i) not later than the 20th day following the Closing Date, prepare and file
with the NASDAQ (as well as any other national securities exchange or market or
trading or quotation facility on which the Common Stock is then listed) an
additional shares listing application covering a number of shares of Common
Stock which is at least equal to the number of shares required to be reserved
pursuant to Section 2.1(d), (ii) take all steps necessary to cause the such
shares to be approved for listing in the NASDAQ (as well as on any other
national securities exchange or market or trading or quotation facility on which
the Common Stock is then listed) as soon as possible thereafter, and (iii)
provide to the Purchaser evidence of such listing, and the Company shall
maintain the listing of its Common Stock thereon. If the number of Underlying
Shares as are issuable upon conversion in full of the then number of outstanding
principal amount of Debentures, as payment or interest thereon, and upon
exercise of the then unexercised portion of the Warrant exceeds 185% of the
number of Underlying Shares previously listed on account thereof with NASDAQ
(and other required exchanges), the Company shall take the necessary actions to
immediately list a number of Underlying Shares as equal to 200% of the number of
Underlying Shares then issuable upon conversion of the Debentures and as payment
of interest thereon and exercise of the Warrant.
(b) The Company shall maintain a reserve of Common Stock for
the issuance upon conversion of Debentures (and for payment of interest thereon
in shares of Common Stock) and upon exercise of the Warrant in accordance with
their terms, in such amount as may be required to perform its obligations in
full under the Transaction Documents, which reserve shall include a number of
shares of common Stock equal to no less than two times the number of shares of
Common Stock as would be issuable upon conversion in full of the Debentures,
upon payment of interest thereon and upon conversion in full of the Warrant.
3.8 Purchaser Ownership of Common Stock. The Purchaser agrees
not to convert Debentures or exercise Warrants to the extent such conversion or
exercise would result in the Purchaser beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act
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<PAGE>
and the rules thereunder) in excess of 4.999% of the then issued and outstanding
shares of Common Stock, including shares issuable upon conversion of the
Debentures and exercise of the Warrant held by such Purchaser after application
of this Section. To the extent that the limitation contained in this Section
applies, the determination of whether Debentures are convertible (in relation to
other securities owned by a Purchaser) and of which portion of the principal
amount of such Debentures are convertible shall be in the sole discretion of the
Purchaser, and the submission of Debentures for conversion shall be deemed to be
such Purchaser's determination of whether such Debentures are convertible (in
relation to other securities owned by a Purchaser) and of which portion of such
Debentures are convertible, in each case subject to such aggregate percentage
limitation, and the Company shall have no obligation to verify or confirm the
accuracy of such determination. Nothing contained herein shall be deemed to
restrict the right of the Purchaser to convert Debentures or exercise the
Warrant at such time as such conversion will not violate the provisions of this
Section. The provisions of this Section will not apply to any conversion
pursuant to Section 4(a)(ii) of the Debentures, and may be waived by the
Purchaser upon not less than 75 days prior notice to the Company, and the
provisions of this Section shall continue to apply until such 75th day (or
later, if stated in the notice of waiver).
3.9 Conversion Procedures. Exhibit F sets forth the procedures with
respect to the conversion of the Debentures and exercise of the Warrant,
including the form of legal opinion, if necessary, that shall be rendered to the
Company's transfer agent and such other information and instructions as may be
reasonably necessary to enable the Purchaser to convert its Debentures and
exercise the Warrant as contemplated in the Debentures and the Warrant (as
applicable).
3.10 Notice of Breaches. (a) Each of the Company and the Purchaser
shall give prompt written notice to the other of any breach by it of any
representation, warranty or other agreement contained in any Transaction
Document, as well as any events or occurrences arising after the date hereof
which would reasonably be likely to cause any representation or warranty or
other agreement of such party, as the case may be, contained therein to be
incorrect or breached as of the Closing Date. However, no disclosure by either
party pursuant to this Section shall be deemed to cure any breach of any
representation, warranty or other agreement contained in any Transaction
Document.
(b) Notwithstanding the generality of Section 3.11(a), the
Company shall promptly notify the Purchaser of any notice or claim (written or
oral) that it receives from any lender of the Company to the effect that the
consummation of the transactions contemplated by the Transaction Documents
violates or would violate any written agreement or understanding between such
lender and the Company, and the Company shall promptly furnish by facsimile to
the holders of the Debentures a copy of any written statement in support of or
relating to such claim or notice.
3.11 Conversion and Exercise Obligations of the Company. The Company
shall honor conversions of the Debentures and exercises of the Warrant and shall
deliver Underlying Shares in accordance with the respective terms and conditions
and time periods set forth in the Debentures and the Warrant.
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3.12 Right of First Refusal; Subsequent Registrations; Certain
Corporate Actions. (a) The Company shall not, directly or indirectly, without
the prior written consent of Encore Capital Management, L.L.C. ("Encore"),
offer, sell, grant any option to purchase, or otherwise dispose of (or announce
any offer, sale, grant or any option to purchase or other disposition) any of
its or its Affiliates' equity or equity-equivalent securities or any instrument
that permits the holder thereof to acquire Common Stock at any time over the
life of the security or investment at a price that is less than the market price
of the Common Stock at the time of issuance of such security or investment (a
"Subsequent Financing" for a period of 180 days after the Closing Date, except
(i) the granting of options or warrants to employees, officers and directors,
and the issuance of shares upon exercise of options granted, under any stock
option plan heretofore or hereinafter duly adopted by the Company, (ii) shares
issued upon exercise of any currently outstanding warrants and upon conversion
of any currently outstanding convertible securities of the Company in each case
disclosed in Schedule 2.1(c), and (iii) shares of Common Stock issued upon
conversion of Debentures, as payment of interest thereon, or upon exercise of
the Warrant in accordance with their respective terms, unless (A) the Company
delivers to Encore a written notice (the "Subsequent Financing Notice") of its
intention to effect such Subsequent Financing, which Subsequent Financing Notice
shall describe in reasonable detail the proposed terms of such Subsequent
Financing, the amount of proceeds intended to be raised thereunder, the Person
with whom such Subsequent Financing shall be affected, and attached to which
shall be a term sheet or similar document relating thereto, and (B) Encore shall
not have notified the Company by 5:00 p.m. (New York City time) on the tenth
(10th) Trading Day after its receipt of the Subsequent Financing Notice of its
willingness to cause the Purchaser to provide (or to cause its sole designee to
provide), subject to completion of mutually acceptable documentation, financing
to the Company on substantially the terms set forth in the Subsequent Financing
Notice. If Encore shall fail to notify the Company of its intention to enter
into such negotiations within such time period, the Company may effect the
Subsequent Financing upon the terms and to the Persons (or Affiliates of such
Persons) set forth in the Subsequent Financing Notice; provided, that the
Company shall provide Encore with a second Subsequent Financing Notice, and
Encore shall again have the right of first refusal set forth above in this
Section, if the Subsequent Financing subject to the initial Subsequent Financing
Notice shall not have been consummated for any reason on the terms set forth in
such Subsequent Financing Notice within thirty (30) Trading Days after the date
of the initial Subsequent Financing Notice with the Person (or an Affiliate of
such Person) identified in the Subsequent Financing Notice.
(b) Except for Underlying Shares and other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to be
registered in accordance with the Registration Rights Agreement, and other than
Company securities to be registered for resale in connection with financings
permitted pursuant to paragraph (a)(i) through (iii) of this Section, the
Company shall not, without the prior written consent of the Purchasers (i) issue
or sell any of its or any of its Affiliates' equity or equity-equivalent
securities pursuant to Regulation S promulgated under the Securities Act, or
(ii) register for resale any securities of the Company for, in either case of
(i) and (ii) above, a period of not less than 90 Trading Days after the date
that the Underlying Shares Registration Statement is declared effective by the
Commission. Any days that the Purchaser is unable to sell Underlying Shares
under the Underlying Shares Registration Statement shall be added to such 90
Trading Day period for the purposes of (i) and (ii) above.
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(c) As long as there are Debentures outstanding, the Company
shall not and shall cause the Subsidiaries not to, without the consent of the
holders of the Debentures, (i) amend its certificate of incorporation, bylaws or
other charter documents so as to adversely affect any rights of the holders of
Debentures; (ii) repay, repurchase or offer to repay, repurchase or otherwise
acquire shares of its Common Stock other than as to the Underlying Shares to the
extent permitted or required under the Transaction Documents; or (iii) enter
into any agreement with respect to any of the foregoing
3.13 Certain Securities Laws Disclosures; Publicity. The Company shall
timely file with the Commission a Form D promulgated under the Securities Act as
required under Regulation D promulgated under the Securities Act and provide a
copy thereof to the Purchaser promptly after the filing thereof. The Company
shall (i) issue a press release acceptable to the Purchaser disclosing the
transactions contemplated hereby within three (3) Business Days after the
Closing Date and (ii) file with the Commission a Report on Form 8-K disclosing
the transactions contemplated hereby within ten (10) Business Days after the
Closing Date.
3.14 Use of Proceeds. The Company shall use the net proceeds from the
sale of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of Company debt or to redeem any Company equity or
equity-equivalent securities. Pending application of the proceeds of this
placement in the manner permitted hereby, the Company will invest such proceeds
in interest bearing accounts and/or short-term, investment grade interest
bearing securities.
3.15 Transfer of Intellectual Property Rights. Except in connection
with the sale of all or substantially all of the assets of the Company, the
Company shall not transfer, sell or otherwise dispose of any Intellectual
Property Rights, or allow any of the Intellectual Property Rights to become
subject to any Liens, or fail to renew such Intellectual Property Rights (if
renewable and it would otherwise lapse if not renewed), without the prior
written consent of the Purchaser.
3.16 Certain NASDAQ Compliance. The Company shall, no later than May
11, 1998, provide the NASDAQ with a business plan and other information
requested in the NASDAQ's letter to the Company dated April 27, 1998.
3.17 Reimbursement. If the Purchaser, other than by reason of its gross
negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by or against any Person, including
stockholders of the Company, in connection with or as a result of the
consummation of the transactions contemplated by Transaction Documents, the
Company will reimburse the Purchaser for its reasonable legal and other expenses
(including the cost of any investigation and preparation) incurred in connection
therewith, as such expenses are incurred. In addition, other than with respect
to any matter in which the Purchaser is a named party, the Company will pay the
Purchaser the charges, as reasonably determined by the Purchaser, for the time
of any officers or employees of the Purchaser devoted to appearing and preparing
to appear as witnesses, assisting in preparation for hearings, trials or
pretrial matters, or otherwise with respect
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<PAGE>
to inquiries, hearings, trials, and other proceedings relating to the subject
matter of this Agreement. The reimbursement obligations of the Company under
this paragraph shall be in addition to any liability which the Company may
otherwise have, shall extend upon the same terms and conditions to any
Affiliates of the Purchaser who are actually named in such action, proceeding or
investigation, and partners, directors, agents, employees and controlling
persons (if any), as the case may be, of the Purchaser and any such Affiliate,
and shall be binding upon and inure to the benefit of any successors, assigns,
heirs and personal representatives of the Company, the Purchaser and any such
Affiliate and any such Person. The Company also agrees that neither the
Purchaser nor any such Affiliates, partners, directors, agents, employees or
controlling persons shall have any liability to the Company or any person
asserting claims on behalf of or in right of the Company in connection with or
as a result of the consummation of the Transaction Documents except to the
extent that any losses, claims, damages, liabilities or expenses incurred by the
Company result from the gross negligence or willful misconduct of the Purchaser
or entity in connection with the transactions contemplated by this Agreement.
ARTICLE IV
MISCELLANEOUS
4.1 Fees and Expenses. At the Closing the Company shall pay
$15,000 to the Escrow Agent in connection with the preparation and negotiation
of the Transaction Documents and $5,000 to the Purchaser or its designee for due
diligence expenses. Other than the amounts contemplated in the immediately prior
sentence, and except as otherwise set forth in the Registration Rights
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of the Securities pursuant
hereto.
4.2 Entire Agreement; Amendments. This Agreement, together
with the Exhibits and Schedules hereto, the Registration Rights Agreement, the
Debentures, the Escrow Agreement, and the Warrant contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.
4.3 Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 8:00 p.m. (New
York City time) on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in the Purchase Agreement later than 8:00
p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the Business Day following the date of mailing, if
sent by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom
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such notice is required to be given. The address for such notices and
communications shall be as follows:
If to the Company: Global Intellicom, Inc.
747 Third Avenue
New York, NY 10017
Facsimile No.: (212) 750-2320
Attn: President
With copies to: Rosner, Bresler, Goodman & Unterman, LLP
521 Fifth Avenue
New York, NY 10175
Facsimile No.: (212) 949-6131
Attn: Andrew J. Goodman
If to the Purchaser: JNC Opportunity Fund Ltd.
c/o Olympia Capital (Cayman) Ltd.
Williams House
20 Reid Street
Hamilton HM11 Bermuda
Facsimile No.: (441) 295-2305
Attn: Director
With copies to: Encore Capital Management, L.L.C.
12007 Sunrise Valley Drive,
Suite 460
Reston, VA 20191
Facsimile No.: (703) 476-7711
Attn: Managing Member
-and-
Robinson Silverman Pearce Aronsohn &
Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630
Attn: Eric L. Cohen
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
4.4 Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Purchaser; or, in the case of a waiver,
by the party against whom enforcement of any such
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waiver is sought. No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter.
4.5 Headings. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
4.6 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Purchaser. Except as set
forth in Section 3.1(a), the Purchaser may assign this Agreement or any of the
rights or obligations hereunder without the consent of the Company.
This provision shall not limit the Purchaser's right to transfer securities or
transfer or assign rights hereunder or under the Registration Rights Agreement.
4.7 No Third-Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective successors and
permitted assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person, other than with respect to Encore, who is an
intended beneficiary of, and may enforce the provisions of Section 3.12.
4.8 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to the principles of conflicts of law thereof. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that or
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
4.9 Survival. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery and
conversion or exercise (as the case may be) of the Debentures and Warrants.
4.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
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delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
4.11 Publicity. The Company and the Purchaser shall consult
with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and neither
party shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed, except that no prior consent shall be
required if such disclosure is required by law, in which such case the
disclosing party shall provide the other party with prior notice of such public
statement. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of the Purchaser without the prior written consent of the
Purchaser, except to the extent such disclosures (but not any disclosure as to
the controlling Persons thereof) is required by law, in which case the Company
shall provide the Purchaser with prior notice of such disclosure.
4.12 Severability. In case any one or more of the provisions
of this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
4.13 Remedies. In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, the
Purchaser will be entitled to specific performance of the obligations of the
Company under the Transaction Documents. Each of the Company and the Purchaser
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of its obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be adequate.
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SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this
Convertible Debenture Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.
GLOBAL INTELLICOM, INC.
By: /s/ N. Norman Muller
-------------------------------------
Name: N. Norman Muller
Title: Chief Executive Officer
JNC OPPORTUNITY FUND LTD.
By: /s/ Thomas H. Davis
-------------------------------------
Name: Thomas H. Davis
Title: Director
<PAGE>
EXHIBIT 10.02
NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
THIS DEBENTURE IS SUBJECT TO CERTAIN RESTRICTIONS ON CONVERSION SET
FORTH IN SECTION 3.8 OF A CONVERTIBLE DEBENTURE PURCHASE AGREEMENT, DATED AS
OF APRIL 30, 1998, BETWEEN GLOBAL INTELLICOM, INC. (THE "COMPANY") AND THE
ORIGINAL HOLDER HEREOF. A COPY OF THAT AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY.
No. A-1 $500,000
GLOBAL INTELLICOM, INC.
6% CONVERTIBLE DEBENTURE APRIL 30, 2001
THIS DEBENTURE is one of a series of duly authorized issued debentures of
Global Intellicom, Inc., a Nevada corporation, having a principal place of
business at 747 Third Avenue, New York, NY 10017 (the "Company"), designated as
its 6% Convertible Debentures, due April 30, 2001 (the "Debentures"), in an
aggregate principal amount of $2,000,000.
FOR VALUE RECEIVED, the Company promises to pay to JNC Opportunity Fund
Ltd., or registered assigns (the "Holder"), the principal sum of Five Hundred
Thousand Dollars ($500,000), on or prior to April 30, 2001 or such earlier date
as the Debentures are required to be repaid as provided hereunder (the "Maturity
Date") and to pay interest to the Holder on the principal sum at the rate of 6%
per annum, payable quarterly in arrears commencing June 30, 1998, but in no
event later than the earlier to occur of a Conversion Date (as defined in
Section 5(a)(i)) for such principal amount or the Maturity Date. Interest shall
accrue daily commencing on the Original Issue Date (as defined in Section 7)
until payment in full of the principal sum, together with all accrued and unpaid
interest and other amounts which may become due hereunder, has been made.
Interest shall be calculated on the basis of a 360-day year and for the actual
number of days elapsed. Interest hereunder will be paid to the Person (as
defined in Section 7) in whose name this Debenture is
<PAGE>
registered on the records of the Company regarding registration and transfers of
Debentures (the "Debenture Register"). All overdue, accrued and unpaid interest
and other amounts due hereunder shall bear interest at the rate of 15% per annum
(to accrue daily) from the date such interest is due hereunder through and
including the date of payment. The principal of, and interest on, this
Debenture are payable in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts, at the address of the Holder last appearing on the Debenture Register,
except that interest due on the principal amount (but not overdue interest) may,
at the Company's option, be paid in shares of Common Stock (as defined in
Section 7) calculated based upon the Conversion Price (as defined below) on the
date such interest was due. All amounts due hereunder other than such interest
shall be paid in cash. Notwithstanding anything to the contrary contained
herein, the Company may not issue shares of Common Stock in payment of interest
on the principal amount if: (i) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes, or held as treasury stock,
is insufficient to pay interest hereunder in shares of Common Stock; (ii) such
shares are not either registered for resale pursuant to an Underlying Securities
Registration Statement (as defined in Section 7) or freely transferable without
volume restrictions pursuant to Rule 144(k) promulgated under the Securities Act
of 1933, as amended (the "Securities Act"), as determined by counsel to the
Company pursuant to a written opinion letter addressed and in form and substance
acceptable to the Holder and the transfer agent for such shares; (iii) such
shares are not listed or quoted on the Nasdaq SmallCap Market (or the Nasdaq
National Market, the American Stock Exchange or the New York Stock Exchange) and
any other exchange or market on which the Common Stock is then listed or quoted;
or (iv) the issuance of such shares would result in the recipient thereof
beneficially owning more than 4.999% of the issued and outstanding shares of
Common Stock as determined in accordance with Rule 13d-3 under the Securities
Exchange Act of 1934, as amended. Payment of interest on the principal amount
in shares of Common Stock is further subject to the provisions of Section
5(a)(ii).
This Debenture is subject to the following additional provisions:
Section 1. The indebtedness evidenced by this Debenture (and all
indebtedness evidenced by any agreements or instruments in the nature of
replacements to, or extensions or amendments of the obligations represented by,
this Debenture) shall be at all times and in all respects wholly subordinate,
junior and subject in right of payment to (i) indebtedness of the Company and
its subsidiaries to Finova Capital Corp. and Century Business Credit Corporation
("Prior Indebtedness") and (ii) existing or future indebtedness of the Company
and its subsidiaries to a banking or other commercial lending institution ("Bank
Indebtedness"). Without limiting the effect of the foregoing, "subordinate," as
used herein, shall be deemed to mean that, in the event of a declared default in
the payment of any such Prior Indebtedness or Bank Indebtedness resulting in the
acceleration of amounts payable thereunder (after giving effect to "cure"
provisions, if any) or of any liquidation, insolvency, bankruptcy,
reorganization, or similar proceedings relating to the Company or any of its
subsidiaries, all sums payable on such Prior Indebtedness and Bank Indebtedness
shall first be paid in full, with the interest due thereon, if any, before any
payment is made upon the indebtedness evidenced by the Debenture, and in such
event, prior thereto any
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<PAGE>
payment or distribution of any character which shall be made in respect of the
Debenture shall be paid over to the holders of the Prior Indebtedness and Bank
Indebtedness for application pro rata to the payment thereof, unless and until
the Prior Indebtedness and the Bank Indebtedness shall have been first paid and
satisfied in full.
Section 2. This Debenture is exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as
requested by the Holder surrendering the same but shall not be issuable in
denominations of less than integral multiplies of Fifty Thousand Dollars
($50,000) unless such amount represents the full principal balance of Debentures
outstanding to such Holder. No service charge will be made for such
registration of transfer or exchange.
Section 3. This Debenture has been issued subject to certain
investment representations of the original Holder set forth in the Purchase
Agreement and may be transferred or exchanged only in compliance with the
Purchase Agreement. Prior to due presentment to the Company for transfer of
this Debenture, the Company and any agent of the Company may treat the Person in
whose name this Debenture is duly registered on the Debenture Register as the
owner hereof for the purpose of receiving payment as herein provided and for all
other purposes, whether or not this Debenture is overdue, and neither the
Company nor any such agent shall be affected by notice to the contrary.
Section 4. Events of Default.
(a) "Event of Default", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
(i) any default in the payment of the principal of, interest on or
liquidated damages in respect of this Debenture, as and when the same shall
become due and payable (whether on the applicable quarterly interest
payment date, a Conversion Date or the Maturity Date or by acceleration or
otherwise, including if by reason of enforcement of any subordination
provisions);
(ii) the Company shall fail to observe or perform any other covenant,
agreement or warranty contained in, or otherwise commit any breach of, this
Debenture, the Purchase Agreement or the Registration Rights Agreement, and
such failure or breach shall not have been remedied within 15 days after
the date on which notice of such failure or breach shall have been given;
(iii) the Company or any of its subsidiaries shall commence, or
there shall be commenced against the Company or any such subsidiary a case
under any applicable bankruptcy or insolvency laws as now or hereafter in
effect or any successor thereto, or the Company commences any other
proceeding under any reorganization, arrangement,
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<PAGE>
adjustment of debt (other than the restructuring or working out of amounts
owed pursuant to indebtedness to trade creditors, banks, and financial
institutions to the extent such restructurings or work outs do not violate
other provisions hereof) , relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to the Company or any subsidiary thereof or there is
commenced against the Company or any subsidiary thereof any such
bankruptcy, insolvency or other proceeding which remains undismissed for a
period of 90 days; or the Company or any subsidiary thereof is adjudicated
insolvent or bankrupt; or any order of relief or other order approving any
such case or proceeding is entered; or the Company or any subsidiary
thereof suffers any appointment of any custodian or the like for it or any
substantial part of its property which continues undischarged or unstayed
for a period of 90 days; or the Company or any subsidiary thereof makes a
general assignment for the benefit of creditors; or the Company shall fail
to pay, or shall state that it is unable to pay, or shall be unable to pay,
its debts generally as they become due; or the Company or any subsidiary
thereof shall call a meeting of its creditors with a view to arranging a
composition or adjustment of its debts; or the Company or any subsidiary
thereof shall by any act or failure to act indicate its consent to,
approval of or acquiescence in any of the foregoing; or any corporate or
other action is taken by the Company or any subsidiary thereof for the
purpose of effecting any of the foregoing;
(iv) the Company shall default in any of its obligations under any
mortgage, credit agreement or other facility, indenture agreement or other
instrument under which there may be issued, or by which there may be
secured or evidenced any indebtedness of the Company in an amount exceeding
one hundred thousand dollars ($100,000), whether such indebtedness now
exists or shall hereafter be created and such default shall result in such
indebtedness becoming or being declared due and payable prior to the date
on which it would otherwise become due and payable;
(v) the Common Stock shall be delisted from the Nasdaq SmallCap
Market or shall be suspended from trading thereon without resuming trading
and/or being relisted (as the case may be) thereon or on the Nasdaq
National Market, the American Stock Exchange or the New York Stock Exchange
or having such suspension lifted, as the case may be, within four (4) days;
(vi) the Company shall be a party to any merger or consolidation
pursuant to which the Company shall not be the surviving entity (or, if the
Company is the surviving entity, the Company shall issue or sell to another
Person, or group thereof, in excess of 50% of the Common Stock) or shall
dispose of in excess of 50% of its assets in one or more transactions, or
shall redeem more than a de minimis number of shares of Common Stock (other
than redemptions of Underlying Shares);
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<PAGE>
(vii) an Underlying Securities Registration Statement shall not
have been declared effective by the Securities and Exchange Commission (the
"Commission") on or prior to the 180th day after the Original Issue Date;
(viii) an Event (as hereinafter defined) shall not have been cured
to the satisfaction of the Holder prior to the expiration of thirty (30)
days from the Event Date (as hereinafter defined) relating thereto (other
than an Event resulting from a failure of an Underlying Securities
Registration Statement to be declared effective by the Commission on or
prior to the Effective Date (as defined in the Registration Rights
Agreement); or
(ix) the Company shall fail to deliver certificates to a Holder prior
to the Fifteenth (15th) day after the Conversion Date pursuant to Section
5(b).
(b) If any Event of Default occurs and is continuing, the full principal
amount of this Debenture (and, at the Holder's option, all other Debentures then
held by such Holder), together with interest and other amounts owing in respect
thereof, to the date of acceleration shall become, immediately due and payable
in cash. The aggregate amount payable upon an Event of Default shall be equal
to the sum of (i) the Mandatory Prepayment Amount plus (ii) the product of (A)
the number of Underlying Shares issued in respect of conversions hereunder or as
payment of interest hereunder and then held by the Holder and (B) the Per Share
Market Value on the date prepayment is due or the date the full prepayment price
is paid, whichever is greater, provided, upon full payment of the amount
required hereunder upon an Event of Default, all Holders receiving such payment
shall surrender all Debentures and Underlying Securities to the Company.
Interest shall accrue on the prepayment amount hereunder from the seventh day
after such amount is due (being the date of an Event of Default) through the
date of payment in full thereof at the rate of 15% per annum. The Holder need
not provide and the Company hereby waives any presentment, demand, protest or
other notice of any kind, and the Holder may immediately and without expiration
of any grace period enforce any and all of its rights and remedies hereunder and
all other remedies available to it under applicable law. Such declaration may
be rescinded and annulled by Holder at any time prior to payment hereunder. No
such rescission or annulment shall affect any subsequent Event of Default or
impair any right consequent thereon.
Section 5. Conversion.
(a)(i) This Debenture shall be convertible into shares of Common
Stock at the option of the Holder, in whole or in part at any time and from time
to time, after the earlier of (i) the date that the Underlying Securities
Registration Statement is declared effective by the Commission, and (ii) the
90th day following the Original Issue Date. The number of shares of Common
Stock issuable upon a conversion hereunder shall be determined by dividing the
outstanding principal amount of this Debenture to be converted, plus all accrued
but unpaid interest thereon, by the Conversion Price (as defined below), each as
subject to adjustment as provided hereunder. The Holder shall effect
conversions by surrendering the Debentures (or such portions thereof) to be
converted, together with the form of conversion notice attached hereto as
Exhibit A (a "Conversion
5
<PAGE>
Notice") to the Company. Each Conversion Notice shall specify the principal
amount of Debentures to be converted and the date on which such conversion is to
be effected, which date may not be prior to the date such Conversion Notice is
deemed to have been delivered hereunder (a "Conversion Date"). If no Conversion
Date is specified in a Conversion Notice, the Conversion Date shall be the date
that such Conversion Notice is deemed delivered hereunder. Subject to Section
5(b) hereof and Section 3.8 of the Purchase Agreement, each Conversion Notice,
once given, shall be irrevocable. If the Holder is converting less than all of
the principal amount represented by the Debenture(s) tendered by the Holder with
the Conversion Notice, or if a conversion hereunder cannot be effected in full
for any reason, the Company shall honor such conversion to the extent
permissible hereunder and shall promptly deliver to such Holder (in the manner
and within the time set forth in Section 5(b)) a new Debenture for such
principal amount as has not been converted. Further, the principal amount of
Debentures that are subject to conversion pursuant to this section shall be
limited to the number of Underlying Shares which may be issued upon such
conversion at the prevailing Conversion Price in accordance with Rule 4460(i)
promulgated under the Rules of the Nasdaq
Stock Market (or any successor entity thereto). Any portion of the principal
amount of the Debentures which cannot be converted at the then Conversion Price
as a result of such rule shall be subject to the provisions of Section
5(a)(iii).
(ii) Automatic Conversion. Subject to the provisions in this
paragraph, the principal amount of Debentures for which conversion notices have
not previously been received or for which prepayment has not been made or
required hereunder shall be automatically converted on the third anniversary of
the Original Issue Date at the Conversion Price on such date. The conversion
contemplated by this paragraph shall not occur if (a) neither (1) an Underlying
Securities Registration Statement is not then effective that names the Holder as
a selling stockholder thereunder nor (2) the Holder is permitted to resell
Underlying Shares pursuant to Rule 144(k) promulgated under the Securities Act,
without volume restrictions, as evidenced by an opinion letter of counsel
acceptable to the Holder and the transfer agent for the Common Stock; (b) there
are not sufficient shares of Common Stock authorized and reserved for issuance
upon such conversion; and (c) the Company shall not have defaulted on its
covenants and obligations hereunder or under the Purchase Agreement or
Registration Rights Agreement. Further, the principal amount of Debentures that
are subject to conversion pursuant to this section shall be limited to the
number of Underlying Shares which may be issued upon such conversion at the
prevailing Conversion Price in accordance with Rule 4460(i) promulgated under
the Rules of the Nasdaq Stock Market (or any successor entity thereto). Any
portion of the principal amount of the Debentures which cannot be converted at
the then Conversion Price as a result of such rule shall be subject to the
provisions of Section 5(a)(iii).
(iii) Certain Regulatory Approval. If on any Conversion Date (A) the
Common Stock is listed for trading on the Nasdaq National Market or the Nasdaq
SmallCap Market, (B) the Conversion Price then in effect is such that the
aggregate number of shares of Common Stock that would then be issuable upon
conversion in full of the aggregate principal amount of all then outstanding
Debentures, together with any shares of the Common Stock previously issued upon
conversion of Debentures and as payment of interest thereon, would equal or
exceed 20% of the number of shares of the Common Stock outstanding on the
Original Issue Date (such number of
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shares as would not equal or exceed such 20% limit, the "Issuable Maximum"), and
(C) the Company shall not have previously obtained the vote of shareholders (the
"Shareholder Approval"), if any, as may be required by the rules and regulations
of The Nasdaq Stock Market (or any successor thereto) applicable to approve the
issuance of Common Stock in excess of the Issuable Maximum in a private
placement whereby shares of Common Stock are deemed to have been issued at a
price that is less than the greater of book or fair market value of the Common
Stock, then the Company shall issue to the Holder so requesting a conversion a
number of shares of Common Stock equal to the Issuable Maximum and, with respect
to the remainder of the principal amount of Debentures then held by such Holder
for which a conversion in accordance with the Conversion Price would result in
an issuance of Common Stock in excess of the Issuable Maximum, the converting
Holder shall have the option to require the Company to either (1) use its best
efforts to obtain the Shareholder Approval applicable to such issuance as soon
as is possible, but in any event not later than the 60th day after such request,
or (2)(i) issue and deliver to such Holder a number of shares of Common Stock as
equals (x) the principal amount of Debentures tendered for conversion in respect
of the Conversion Notice at issue but for which a conversion in accordance with
the other terms hereof would result in an issuance of Common Stock in excess of
the Issuable Maximum, divided by (y) the Initial Conversion Price (as defined
below), and (ii) cash in an amount equal to the product of (x) the Per Share
Market Value on the Conversion Date and (y) the number of shares of Common Stock
in excess of such Holder's pro rata portion of the Issuable Maximum that would
have otherwise been issuable to the Holder in respect of such conversion but for
the provisions of this Section (such amount of cash being hereinafter referred
to as the "Discount Equivalent"), or (3) pay cash to the converting Holder in an
amount equal to the Mandatory Prepayment Amount for the number of Underlying
Shares in or issuable upon such conversion is excess of the Issuable Maximum.
If the Company fails to pay the Discount Equivalent or the Mandatory Prepayment
Amount, as the case may be, in full pursuant to this Section within seven (7)
days after the date payable, the Company will pay interest thereon at a rate of
15% per annum to the converting holder, accruing daily from the Conversion Date
until such amount, plus all such interest thereon, is paid in full.
(b) (i) Not later than three Trading Days after the Conversion Date,
the Company will deliver or cause to be delivered to the Holder (i) a
certificate or certificates which shall be free of restrictive legends and
trading restrictions (other than those required by Section 3.1(b) of the
Purchase Agreement) representing the number of shares of the Common Stock being
acquired upon the conversion of Debentures (subject to reduction pursuant to
Section 3.8 of the Purchase Agreement), (ii) Debentures in a principal amount
equal to the principal amount of Debentures not converted; (iii) a bank check in
the amount of all accrued and unpaid interest (if the Company has elected to pay
accrued interest in cash), together with all other amounts then due and payable
in accordance with the terms hereof, in respect of Debentures tendered for
conversion, and (iv) if the Company has elected and is permitted hereunder to
pay accrued interest in shares of the Common Stock, certificates, which shall be
free of restrictive legends and trading restrictions (other than those required
by Section 3.1(b) of the Purchase Agreement), representing such number of shares
of the Common Stock as equals such interest divided by the Conversion Price
calculated on the Conversion
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Date; provided, however, that the Company shall not be obligated to issue
certificates evidencing the shares of the Common Stock issuable upon conversion
of the principal amount of Debentures until Debentures are delivered for
conversion to the Company or the Holder notifies the Company that such Debenture
has been mutilated, lost, stolen or destroyed and complies with Section 10
hereof. If in the case of any Conversion Notice such certificate or
certificates, including for purposes hereof, any shares of the Common Stock to
be issued on the Conversion Date on account of accrued but unpaid interest
hereunder, are not delivered to or as directed by the Holder by the fourth
Trading Day after a Conversion Date, the Holder shall be entitled by written
notice to the Company at any time on or before its receipt of such certificate
or certificates thereafter, to rescind such conversion (whether subject to a
Holder or a Company Conversion Notice), in which event the Company shall
immediately return the Debentures tendered for conversion. If the Company fails
to deliver to the Holder such certificate or certificates pursuant to this
Section, including for purposes hereof, any shares of the Common Stock to be
issued on the Conversion Date on account of accrued but unpaid interest
hereunder, prior to the fourth Trading Day after the Conversion Date, the
Company shall pay to such Holder, in cash, as liquidated damages and not as a
penalty, $1,500 for each day thereafter until the Company delivers such
certificates (such amount shall be also be due for each Trading Day after the
date that the Holder may rescind such conversion until such date as the Holder
shall have received the return of the principal amount of Debentures relating to
such rescission).
(ii) In addition to any other rights available to the Holder, if the
Company fails to deliver to the Holder such certificate or certificates pursuant
to Section 6(b)(i), including for purposes hereof, any shares of Common Stock to
be issued on the Conversion Date on account of accrued but unpaid interest
hereunder, prior to the fourth Trading Day after the Conversion Date, and if
after such the fourth Trading Day the Holder purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
sale by such Holder of the Underlying Shares which the Holder anticipated
receiving upon such conversion (a "Buy-In"), then the Company shall pay in cash
to the Holder (in addition to any remedies available to or elected by the
Holder) the amount by which (x) the Holder's total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so purchased
exceeds (y) the aggregate principal amount of Debentures for which such
conversion was not timely honored. For example, if the Holder purchases shares
of Common Stock having a total purchase price of $11,000 to cover a Buy-In with
respect to an attempted conversion of $10,000 aggregate principal amount of
Debentures, the Company shall be required to pay the Holder $1,000. The Holder
shall provide the Company written notice indicating the amounts payable to the
Holder in respect of the Buy-In. If the Company fails to deliver to the Holder
such certificate or certificates in accordance with this Section 6(b) prior to
the 12th day after the Conversion Date or if the Company shall fail for any
reason to pay any amounts due in respect of a Buy-In within seven days after
notice thereof is deemed delivered hereunder, then the Company shall, upon
notice from the Holder, repay the aggregate principal amount of Debentures then
held by such Holder, as requested by such Holder, at a price equal to the
Mandatory Prepayment Amount, in cash. If any portion of the Mandatory
Prepayment Amount pursuant to this Section is not paid within seven days after
notice therefor is deemed delivered hereunder, the Company will pay interest on
the Mandatory Prepayment Amount
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at a rate of 15% per annum (to accrue daily), in cash to such Holder, accruing
from such seventh day until the Mandatory Prepayment Amount, plus all accrued
interest thereon, is paid in full.
(c) (i) The conversion price (the "Conversion Price") in effect on
any Conversion Date shall be the lesser of (A) 110% of the Average Price
calculated on the Original Issue Date (the "Initial Conversion Price"), and (B)
80% of the average of the five lowest sales prices for the Common Stock during
the twenty five (25) Trading Days immediately preceding the Conversion Date;
provided, that, if (a) an Underlying Securities Registration Statement is not
filed on or prior to the 20th business day after the Original Issue Date, or (b)
the Company fails to file with the Commission a request for acceleration in
accordance with Rule 12d1-2 promulgated under the Securities Exchange Act of
1934, as amended, within five (5) days of the date that the Company is notified
(orally or in writing, whichever is earlier) by the Commission that an
Underlying Securities Registration Statement will not be "reviewed" or is not
subject to further review or comment by the Commission, or (c) the Underlying
Securities Registration Statement is not declared effective by the Commission on
or prior to the Effective Date (as defined under the Registration Rights
Agreement), or (d) such Underlying Securities Registration Statement is filed
with and declared effective by the Commission but thereafter ceases to be
effective as to all Registrable Securities (as such term is defined in the
Registration Rights Agreement) at any time prior to the expiration of the
"Effectiveness Period" (as such term as defined in the Registration Rights
Agreement), without being succeeded by a subsequent Underlying Securities
Registration Statement filed with and declared effective by the Commission
within ten (10) days, or (e) if trading in the Common Stock shall be suspended
for more than three (3) Trading Days, or (f) the conversion rights of the
Holders of Debentures are suspended for any reason or if the Holder is not
permitted to resell Registrable Securities under the Underlying Securities
Registration Statement, or (g) an amendment to the Underlying Securities
Registration Statement is not filed by the Company with the Commission within
ten (10) days of the Commission's notifying the Company that such amendment is
required in order for the Underlying Securities Registration Statement to be
declared effective (any such failure being referred to as an "Event," and for
purposes of clauses (a), (c) and (f) the date on which such Event occurs, or for
purposes of clause (b) the date on which such five (5) day period is exceeded,
or for purposes of clauses (d) and (g) the date which such ten (10) day period
is exceeded, or for purposes of clause (e) the date on which such three (3) day
period is exceeded, being referred to as "Event Date"), the Conversion Price
shall be decreased by 2% on the Event Date and each monthly anniversary thereof
until the earlier to occur of the second month anniversary after the Event Date
and such time as the applicable Event is cured (i.e., the Conversion Price would
decrease by 2% as of the Event Date and 2% as of the one month anniversary of
such Event Date). Commencing the second month anniversary after the Event Date,
at the option of the Holder for each applicable monthly period either (a) the
Company shall pay to the Holder 2% of the product of the principal amount of
outstanding Debentures, in cash or (b) the Conversion Price shall be decreased
by 2% for each additional such month (to be effective in full on the monthly
applicable Event Date) as liquidated damages, and not as a penalty on the first
day of each monthly anniversary of the Event Date in either case until such time
as the applicable Event is cured. Any decrease in the Conversion Price pursuant
to this Section shall remain in effect notwithstanding the fact that the Event
causing such decrease has been subsequently cured and further monthly decreases
have ceased. The
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provisions of this Section are not exclusive and shall in no way limit the
Company's obligations under the Registration Rights Agreement.
(ii) If the Company, at any time while any Debentures are
outstanding, (a) shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of the Common Stock, (b) subdivide
outstanding shares of the Common Stock into a larger number of shares, (c)
combine outstanding shares of the Common Stock into a smaller number of shares,
or (d) issue by reclassification of shares of the Common Stock any shares of
capital stock of the Company, the Initial Conversion Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of the Common
Stock (excluding treasury shares, if any) outstanding before such event and of
which the denominator shall be the number of shares of the Common Stock
outstanding after such event. Any adjustment made pursuant to this Section
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution and shall
become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.
(iii) If the Company, at any time while any Debentures are
outstanding, shall issue rights or warrants to all holders of the Common Stock
(and not to Holders of Debentures) entitling them to subscribe for or purchase
shares of the Common Stock at a price per share less than the Per Share Market
Value of the Common Stock at the record date mentioned below, the Initial
Conversion Price shall be multiplied by a fraction, the numerator of which shall
be the number of shares of the Common Stock (excluding treasury shares, if any)
outstanding immediately prior to the issuance of such rights or warrants plus
the number of shares of Common Stock which the aggregate offering price of the
total number of shares so offered would purchase at such Per Share Market Value
and the denominator of which shall be the number of shares of the Common Stock
(excluding treasury shares, if any) outstanding on the date of issuance of such
rights or warrants plus the number of additional shares of the Common Stock
offered for subscription or purchase. Such adjustment shall be made whenever
such rights or warrants are issued, and shall become effective immediately after
the record date for the determination of stockholders entitled to receive such
rights or warrants. However, upon the expiration of any right or warrant to
purchase shares of the Common Stock the issuance of which resulted in an
adjustment in the Initial Conversion Price pursuant to this Section, if any such
right or warrant shall expire and shall not have been exercised, the Initial
Conversion Price shall immediately upon such expiration be recomputed and
effective immediately upon such expiration be increased to the price which it
would have been (but reflecting any other adjustments in the Initial Conversion
Price made pursuant to the provisions of this Section 5 after the issuance of
such rights or warrants) had the adjustment of the Initial Conversion Price made
upon the issuance of such rights or warrants been made on the basis of offering
for subscription or purchase only that number of shares of the Common Stock
actually purchased upon the exercise of such rights or warrants actually
exercised.
(iv) If the Company, at any time while Debentures are
outstanding, shall distribute to all holders of the Common Stock (and not to
Holders of Debentures) evidences of its
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<PAGE>
indebtedness or assets or rights or warrants to subscribe for or purchase any
security, then in each such case the Initial Conversion Price at which
Debentures shall thereafter be convertible shall be determined by multiplying
the Initial Conversion Price by a fraction of which the denominator shall be the
Per Share Market Value of the Common Stock determined as of the record date
mentioned above, and of which the numerator shall be such Per Share Market Value
of the Common Stock on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith; provided, however, that in
the event of a distribution exceeding ten percent (10%) of the net assets of the
Company, such fair market value shall be determined by a nationally recognized
or major regional investment banking firm or firm of independent certified
public accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company) (an "Appraiser") selected in
good faith by the holders of a majority in interest of Debentures then
outstanding; and provided, further, that the Company, after receipt of the
determination by such Appraiser shall have the right to select an additional
Appraiser, in good faith, in which case the fair market value shall be equal to
the average of the determinations by each such Appraiser. In either case the
adjustments shall be described in a statement provided to the holders of
Debentures of the portion of assets or evidences of indebtedness so distributed
or such subscription rights applicable to one share of the Common Stock. Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
(v) In case of any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, the Holder of this Debenture shall have the
right thereafter to, at its option, (A) convert the then outstanding principal
amount, together with all accrued but unpaid interest and any other amounts then
owing hereunder in respect of this Debenture only into the shares of stock and
other securities, cash and property receivable upon or deemed to be held by
holders of the Common Stock following such reclassification or share exchange,
and the Holders of the Debentures shall be entitled upon such event to receive
such amount of securities, cash or property as the shares of the Common Stock of
the Company into which the then outstanding principal amount, together with all
accrued but unpaid interest and any other amounts then owing hereunder in
respect of this Debenture could have been converted immediately prior to such
reclassification or share exchange would have been entitled or (B) require the
Company to prepay the aggregate of its outstanding principal amount of
Debentures, plus all interest and other amounts due and payable thereon, at a
price determined in accordance with Section 4(b). The entire prepayment price
shall be paid in cash. This provision shall similarly apply to successive
reclassifications or share exchanges.
(vi) All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(vii) Whenever the Initial Conversion Price is adjusted
pursuant to any of Section 5(c)(ii) - (v), the Company shall promptly mail to
each Holder of Debentures a notice setting
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<PAGE>
forth the Initial Conversion Price after such adjustment and setting forth a
brief statement of the facts requiring such adjustment.
(viii) If:
A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common
Stock; or
C. the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital
stock of any class or of any rights; or
D. the approval of any stockholders of the Company
shall be required in connection with any
reclassification of the Common Stock of the
Company, any consolidation or merger to which the
Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, of
any compulsory share of exchange whereby the
Common Stock is converted into other securities,
cash or property; or
E. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up
of the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of the Debentures, and shall cause to be mailed to the
Holders of Debentures at their last addresses as they shall appear upon the
stock books of the Company, at least 20 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of record shall
be entitled to exchange their shares of the Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided, however, that the failure to mail
such notice or any defect therein or in the mailing thereof shall not affect the
validity of the corporate action required to be specified in such notice.
Holders are entitled to convert Debentures during the 20-day period commencing
the date of such notice to the effective date of the event triggering such
notice.
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(d) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of the Common Stock solely
for the purpose of issuance upon conversion of the Debentures and payment of
interest on the Debentures, each as herein provided, free from preemptive rights
or any other actual contingent purchase rights of persons other than the
Holders, not less than such number of shares of the Common Stock as shall
(subject to any additional requirements of the Company as to reservation of such
shares set forth in the Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 5(c)) upon the conversion of the
outstanding principal amount of the Debentures and payment of interest
hereunder. The Company covenants that all shares of the Common Stock that shall
be so issuable shall, upon issue, be duly and validly authorized, issued and
fully paid, nonassessable and, if the Underlying Securities Registration
Statement has been declared effective under the Securities Act, registered for
public sale in accordance with such Underlying Securities Registration
Statement.
(e) Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of the Common Stock,
but may if otherwise permitted, make a cash payment in respect of any final
fraction of a share based on the Per Share Market Value at such time. If the
Company elects not, or is unable, to make such a cash payment, the holder shall
be entitled to receive, in lieu of the final fraction of a share, one whole
share of Common Stock.
(f) The issuance of certificates for shares of the Common Stock on
conversion of the Debentures shall be made without charge to the Holders thereof
for any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such certificate, provided that the Company shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate upon conversion in a name
other than that of the Holder of such Debentures so converted and the Company
shall not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
(g) Any and all notices or other communications or deliveries to be
provided by the Holders of the Debentures hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by facsimile, sent by a nationally recognized overnight courier service or sent
by certified or registered mail, postage prepaid, addressed to the Company, at
747 Third Avenue, New York, NY 10017 (facsimile number (212) 750-2320, attention
President, or such other address or facsimile number as the Company may specify
for such purposes by notice to the Holders delivered in accordance with this
Section. Any and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and delivered personally,
by facsimile, sent by a nationally recognized overnight courier service or sent
by certified or registered mail, postage prepaid, addressed to each Holder of
the Debentures at the facsimile telephone number or address of such Holder
appearing on the books of the Company, or if no such facsimile telephone number
or address appears, at the principal place of business of the holder. Any
notice or other communication or deliveries hereunder shall be deemed given and
effective on the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section prior to 8:00 p.m. (New York City time), (ii) the date
after the date of transmission, if such notice or communication is delivered
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<PAGE>
via facsimile at the facsimile telephone number specified in this Section later
than 8:00 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New
York City time) on such date, (iii) four days after deposit in the United States
mail, (iv) the Business Day following the date of mailing, if send by nationally
recognized overnight courier service, or (v) upon actual receipt by the party to
whom such notice is required to be given.
Section 6. Optional Prepayment.
(a) The Company shall have the right to prepay, exercisable at any
time upon twenty (20) days prior written notice to the Holders of the
Debentures to be prepaid and accompanied by any waiver required by holders of
senior indebtedness of the Company for such prepayment so that such prepayment
shall be free and clear of any claims of subordination (the "Optional Prepayment
Notice"), from funds legally available therefor at the time of such prepayment,
all or any portion of the outstanding principal amount of the Debentures which
have not previously been repaid or for which Conversion Notices have not
previously been delivered hereunder, at a price equal to the Optional Prepayment
Price (as defined below). Any such prepayment by the Company shall be in cash
and shall be free of any claim of subordination. The Holders shall have the
right to tender, and the Company shall honor, Conversion Notices delivered prior
to the expiration of the thirtieth (30th) Trading Day after receipt by the
Holders of an Optional Prepayment Notice for such Debentures (such date, the
"Optional Prepayment Date").
(b) If any portion of the Optional Prepayment Price shall not be paid
by the Company by the Optional Prepayment Date, the Optional Prepayment Price
shall be increased by 15% per annum (to accrue daily) until paid (which amount
shall be paid as liquidated damages and not as a penalty). In addition, if any
portion of the optional Prepayment Price remains unpaid through the expiration
of the Optional Prepayment Date, the Holder subject to such prepayment may elect
by written notice to the Company to either (i) demand conversion in accordance
with the formula and the time period therefor set forth in Section 5 of any
portion of the principal amount of Debentures for which the Optional Prepayment
Price, plus accrued liquidated damages thereof, has not been paid in full (the
"Unpaid Prepayment Principal Amount"), in which event the applicable Per Share
Market Value shall be the lower of the Per Share Market Value calculated on the
Optional Prepayment Date and the Per Share Market Value as of the Holder's
written demand for conversion, or (ii) invalidate ab initio such optional
redemption, notwithstanding anything herein contained to the contrary. If the
Holder elects option (i) above, the Company shall within three (3) Trading Days
such election is deemed delivered hereunder to the Holder the shares of Common
Stock issuable upon conversion of the Unpaid Prepayment Principal Amount subject
to such conversion demand and otherwise perform its obligations hereunder with
respect thereto; or, if the Holder elects option (ii) above, the Company shall
promptly, and in any event not later than three Trading Days from receipt of
notice of such election, return to the Holder new Debentures for the full Unpaid
Prepayment Principal Amount. If, upon an election under option (i) above, the
Company fails to deliver the shares of Common Stock issuable upon conversion of
the Unpaid Prepayment Principal Amount within the
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<PAGE>
time period set forth in this Section, the Company shall pay to the Holder in
cash, as liquidated damages and not as a penalty, $1,500 per day until the
Company delivers such Common Stock to the Holder.
(c) The "Optional Prepayment Price" for any Debentures shall equal the
sum of (i) the principal amount of Debentures to be prepaid, plus all accrued
and unpaid interest thereon, divided by the Conversion Price on (x) the Optional
Prepayment Date or (y) the date the Optional Prepayment Price is paid in full,
whichever is less, multiplied by the Average Price on (x) the Optional
Prepayment Date or (y) the date the Optional Prepayment Price is paid in full,
whichever is greater, and (ii) all other amounts, expenses, costs and liquidated
damages due in respect of such principal amount.
Section 7. Definitions. For the purposes hereof, the following
terms shall have the following meanings:
"Average Price" on any date means the average Per Share Market Value
for the five (5) Trading Days immediately preceding such date.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State of
New York are authorized or required by law or other government action to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, $0.01 par value, of the Company
and stock of any other class into which such shares may hereafter have been
reclassified or changed.
"Mandatory Prepayment Amount" for any Debentures shall equal the sum
of (i) the principal amount of Debentures to be prepaid, plus all accrued and
unpaid interest thereon, divided by the Conversion Price on (x) the date the
Mandatory Prepayment Amount is demanded or otherwise due or (y) the date the
Mandatory Prepayment Amount is paid in full, whichever is less, multiplied by
the Average Price on (x) the date the Mandatory Prepayment Amount is demanded or
(y) the date the Mandatory Prepayment Amount is paid in full, whichever is
greater, and (ii) all other amounts, costs, expenses and liquidated damages due
in respect of such Debentures.
"Original Issue Date" shall mean the date of the first issuance of the
Debentures regardless of the number of transfers of any Debenture and regardless
of the number of instruments which may be issued to evidence such Debenture.
"Per Share Market Value" means on any particular date (a) the closing
bid price per share of the Common Stock on such date on the Nasdaq SmallCap or
Nasdaq National Market, as the case may be, or any other stock exchange or
quotation system on which the Common Stock is then listed or if there is no such
price on such date, then the closing bid price on such exchange or
15
<PAGE>
quotation system on the date nearest preceding such date, or (b) if the Common
Stock is not listed then on the Nasdaq Small Cap or Nasdaq National Market or
any stock exchange or quotation system, the closing bid price for a share of
Common Stock in the over-the-counter market, as reported by the National
Quotation Bureau Incorporated or similar organization or agency succeeding to
its functions of reporting prices) at the close of business on such date, or (c)
if the Common Stock is not then reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices), then the average of the "Pink Sheet" quotes for the relevant
conversion period, as determined in good faith by the Holders in majority in
interest of the Debentures, or (d) if the Common Stock is not then publicly
traded the fair market value of a share of Common Stock as determined by an
Appraiser selected in good faith by the Holders of a majority of the aggregate
principal amount of Debentures then outstanding.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement" means the Convertible Debenture Purchase
Agreement, dated as of the Original Issue Date, between the Company and the
original Holder of Debentures, as amended, modified or supplemented from time to
time in accordance with its terms.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, between the Company and the
original Holder of Debentures, as amended, modified or supplemented from time to
time in accordance with its terms.
"Trading Day" means (a) a day on which the Common Stock is traded on
the Nasdaq SmallCap or Nasdaq National Market, as the case may be, or market on
which the Common Stock has been listed, or (b) if the Common Stock is not listed
on the Nasdaq Stock Market or any stock exchange or market, a day on which the
Common Stock is traded on the over-the-counter market, as reported by the OTC
Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted on the over-the-counter market
as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices).
"Underlying Shares" means the shares of Common Stock issuable upon
conversion of Debentures or as payment of interest in accordance with the terms
hereof.
"Underlying Securities Registration Statement" means a registration
statement meeting the requirements set forth in the Registration Rights
Agreement, covering among other things the resale of the Underlying Shares and
naming the Holder as a "selling stockholder" thereunder (which may include an
amendment to the Company's March Registration Statement (as defined in the
Purchase Agreement) satisfying the requirements of the Registration Rights
Agreement).
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<PAGE>
Section 8. Except as expressly provided herein, no provision of
this Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, interest and liquidated
damages (if any) on, this Debenture at the time, place, and rate, and in the
coin or currency, herein prescribed. This Debenture is a direct obligation of
the Company. This Debenture ranks pari passu with all other Debentures now or
hereafter issued under the terms set forth herein. The Company may only
voluntarily prepay the outstanding principal amount on the Debentures in
accordance with Section 6 hereof.
Section 9. This Debenture shall not entitle the Holder to any of
the rights of a stockholder of the Company, including without limitation, the
right to vote, to receive dividends and other distributions, or to receive any
notice of, or to attend, meetings of stockholders or any other proceedings of
the Company, unless and to the extent converted into shares of Common Stock in
accordance with the terms hereof.
Section 10. If this Debenture shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Debenture, or in lieu of or in
substitution for a lost, stolen or destroyed debenture, a new Debenture for the
principal amount of this Debenture so mutilated, lost, stolen or destroyed but
only upon receipt of evidence of such loss, theft or destruction of such
Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.
Section 11. This Debenture shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
conflicts of laws thereof. The Company and the Holders hereby irrevocably
submit to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, or that such suit, action or proceeding is
improper.
Section 12. Any waiver by the Company or the Holder of a breach of
any provision of this Debenture shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Debenture. The failure of the Company or the Holder to insist
upon strict adherence to any term of this Debenture on one or more occasions
shall not be considered a waiver or deprive that party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Debenture. Any waiver must be in writing.
Section 13. If any provision of this Debenture is invalid, illegal
or unenforceable, the balance of this Debenture shall remain in effect, and if
any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances.
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<PAGE>
Section 14. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be made on
the next succeeding Business Day (or, if such next succeeding Business Day falls
in the next calendar month, the preceding Business Day in the appropriate
calendar month).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by a duly authorized officer as of the date first above indicated.
GLOBAL INTELLICOM, INC.
By:
---------------------------------
Name:
Title:
Attest:
By:
---------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF THE HOLDER
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert Debenture No. A-[ ] into shares of
common stock, $0.01 par value (the "Common Stock"), of Global Intellicom, Inc.
(the "Company") according to the conditions hereof, as of the date written
below. If shares are to be issued in the name of a person other than
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if any.
Conversion calculations:
------------------------------------------------------
Date to Effect Conversion
------------------------------------------------------
Principal Amount of Debentures to be Converted
------------------------------------------------------
Number of shares of Common Stock to be Issued
------------------------------------------------------
Applicable Conversion Price
------------------------------------------------------
Signature
------------------------------------------------------
Name
------------------------------------------------------
Address
<PAGE>
Exhibit 10.03
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of April 30, 1998 between Global Intellicom, Inc., a Nevada
corporation (the "Company"), and JNC Opportunity Fund Ltd., a Cayman Islands
corporation (the "Purchaser").
This Agreement is made pursuant to the Convertible Debenture Purchase
Agreement, dated as of the date hereof between the Company and the Purchaser
(the "Purchase Agreement").
The Company and the Purchaser hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement shall have the meanings given such terms in
the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:
"Advice" shall have meaning set forth in Section 3(p).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
New York generally are authorized or required by law or other government actions
to close.
"Closing Date" shall have the meaning set forth in the Purchase
Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, par value $0.01 per
share.
<PAGE>
"Debentures" means the 6% Convertible Debentures due April 30, 2001 of
the Company issued to the Purchaser pursuant to the Purchase Agreement.
"Effectiveness Date" means the 90th day following the Closing Date.
"Effectiveness Period" shall have the meaning set forth in Section
2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Date" means the 20th day following the Closing Date.
"Holder" or "Holders" means the holder or holders, as the case may be,
from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 5(c).
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
"Initial Registration Statement" means the Company's S-3 Registration
Statement filed with the Commission on March 19, 1998.
"Losses" shall have the meaning set forth in Section 5(a).
"New York Courts" shall have the meaning set forth in Section 6(j).
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
2
<PAGE>
"Registrable Securities" means the shares of Common Stock issuable (a)
upon conversion in full of the Debentures, (b) upon exercise in full of the
Warrants, and (c) as payment of interest in respect of the Debentures (assuming
all such interest is paid in shares of Common Stock); provided, however that in
order to account for the fact that the number of shares of Common Stock that are
issuable upon conversion of Debentures is determined in part upon the market
price of the Common Stock at the time of conversion, Registrable Securities
contemplated by clause (a) of this definition shall be deemed to include not
less than 200% of the number of shares of Common Stock into which the Debentures
are convertible, assuming such conversion occurred on the Closing Date or the
Filing Date (whichever date yields a lower Conversion Price, as such term is
defined in the Debentures). The Registration Statement shall cover at least
such number of shares of Common Stock as equals the sum of (x) 200% of the
number of shares of Common Stock into which the Debentures are convertible,
assuming such conversion occurred on the Closing Date or the Filing Date
(whichever date yields a lower Conversion Price), (y) interest thereon (assuming
the Debentures are outstanding for a period of three years and all such interest
is paid in shares of Common Stock), and (z) number of shares of Common Stock
issuable upon exercise in full of the Warrants. The Company shall be required
to file additional Registration Statements to the extent the actual number of
shares of Common Stock into which Debentures are convertible (together with
interest thereon) and Warrants are exercisable exceeds the number of shares of
Common Stock initially registered in accordance with the immediately prior
sentence. The Company shall be required to file additional Registration
Statements within 10 Business Days after notice of the requirement thereof,
which the Holders may give at such time when the number of shares of Common
Stock as are issuable upon conversion of Debentures, as payment of interest
thereon, and upon exercise of the Warrants, exceeds 85% of the number of shares
of Common Stock at such time registered under a Registration Statement.
"Registration Statement" means a pre-effective amendment to the
Initial Registration Statement contemplated by Section 2(a) (covering such
number of Registrable Securities and any additional Registration Statements
contemplated in the definition of Registrable Securities), including (in each
case) the Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to be incorporated
by reference in such registration statement, provided, that in the event the
Initial Registration Statement has been declared effective by the Commission on
or prior to the Filing Date, the term "Registration Statement" shall mean the
new registration statement contemplated by Section 2(a) (covering such number of
Registrable Securities and any additional Registration Statements contemplated
in the definition of Registrable Securities), including (in each case) the
Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
"Rule 158" means Rule 158 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
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"Rule 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means one law firm acting as counsel to the Holders,
for which the Holders will be reimbursed by the Company pursuant to Section 4.
"Underwritten Registration or Underwritten Offering" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
"Warrants" means collectively (a) the common stock purchase warrant to
be issued to the Purchaser pursuant to the Warrant Agreement of the Company
dated the Closing Date, and (b) the common stock purchase warrant issued to
Wharton Capital Partners, Ltd. on the Closing Date.
2. Amendment to Shelf Registration/New Registration Statement
(a) On or prior to the Filing Date the Company shall prepare and file
with the Commission a pre-effective amendment to the Initial Registration
Statement covering all Registrable Securities for an offering to be made on a
continuous basis pursuant to Rule 415 (in accordance, among other things, with
the methods of distribution thereof as specified by the Holders), provided, that
in the event the Initial Registration Statement has been declared effective by
the Commission on or prior to the Filing Date, the Company shall prepare and
file with the Commission a new Registration Statement on Form S-3 (or, if the
Company is not permitted to register the resale of the Registrable Securities on
Form S-3, the Registration Statement shall be on such other appropriate form in
accordance herewith as the Holders of a majority in interest of the Registrable
Securities may consent) in order to provide for the resale of the Registrable
Securities. The Registration Statement shall state, to the extent permitted by
Rule 416 under the Securities Act, that it also covers such indeterminate number
of shares of Common Stock as may be required to effect (i) conversion of the
Debentures (and payment of interest thereon) to prevent dilution resulting from
stock splits, stock dividends or similar events, or by reason of changes in the
Conversion Price in accordance with the terms of the Debentures, and (ii)
exercise of the Warrants in full to prevent dilution resulting from stock
splits, stock dividends or similar events, or by reason of changes in the
Exercise Price (as defined in the Warrants) in accordance with the terms of the
Warrants. The Company shall use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event prior to the Effectiveness
Date, and shall use its best efforts to keep such Registration Statement
continuously effective under the Securities Act until the date which is three
years after the date that such Registration Statement is declared effective by
the Commission or until such earlier date when all Registrable Securities
covered by such Registration Statement have been sold or may be sold without
volume restrictions
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pursuant to Rule 144(k) promulgated under the Securities Act, as determined by
the counsel to the Company pursuant to a written opinion letter to such effect,
addressed and acceptable to the Company's transfer agent (the "Effectiveness
Period"); provided, however, that the Company shall not be deemed to have used
its best efforts to keep the Registration Statement effective during the
Effectiveness Period if it voluntarily takes any action that would result in the
Holders not being able to sell the Registrable Securities covered by such
Registration Statement during the Effectiveness Period, unless such action is
required under applicable law or the Company has filed a post-effective
amendment to the Registration Statement and the Commission has not declared it
effective.
(b) If the Holders of a majority of the Registrable Securities so
elect, an offering of Registrable Securities pursuant to the Registration
Statement may be effected in the form of an Underwritten Offering. In such
event, and if the managing underwriters advise the Company and such Holders in
writing that in their opinion the amount of Registrable Securities proposed to
be sold in such Underwritten Offering exceeds the amount of Registrable
Securities which can be sold in such Underwritten Offering, there shall be
included in such Underwritten Offering the amount of such Registrable Securities
which in the opinion of such managing underwriters can be sold, and such amount
shall be allocated pro rata among the Holders proposing to sell Registrable
Securities in such Underwritten Offering.
(c) If any of the Registrable Securities are to be sold in an
Underwritten Offering, the investment banker in interest that will administer
the offering will be selected by the Holders of a majority of the Registrable
Securities included in such offering upon consultation with the Company. No
Holder may participate in any Underwritten Offering hereunder unless such Person
(i) agrees to sell its Registrable Securities on the basis provided in any
underwriting agreements approved by the Persons entitled hereunder to approve
such arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such arrangements.
3. Registration Procedures
In connection with the Company's registration obligations hereunder,
the Company shall:
(a) Prepare and file with the Commission on or prior to the Filing
Date and in accordance with Section 2(a), a Registration Statement (and any
additional Registration Statements as may be required) in accordance with
Section 2(a), and cause the Registration Statement to become effective and
remain effective as provided herein; provided, however, that not less than five
(5) Business Days prior to the filing of the Registration Statement or any
related Prospectus or any amendment or supplement thereto (including any
document that would be incorporated or deemed to be incorporated therein by
reference), the Company shall (i) furnish to the Holders, their Special Counsel
and any managing underwriters, copies of all such documents proposed to be
filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such Holders, their
Special Counsel and such managing underwriters, and (ii) cause its officers and
directors, counsel and independent certified public accountants to respond to
such
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inquiries as shall be necessary, in the opinion of respective counsel to such
Holders and such underwriters, to conduct a reasonable investigation within the
meaning of the Securities Act. The Company shall not file the Registration
Statement or any such Prospectus or any amendments or supplements thereto to
which the Holders of a majority of the Registrable Securities, their Special
Counsel, or any managing underwriters, shall reasonably object on a timely
basis.
(b) (i) Prepare and file with the Commission such additional
amendments, including post-effective amendments, to the Registration Statement
as may be necessary to keep the Registration Statement continuously effective as
to the applicable Registrable Securities for the Effectiveness Period and
prepare and file with the Commission such additional Registration Statements in
order to register for resale under the Securities Act all of the Registrable
Securities; (ii) cause the related Prospectus to be amended or supplemented by
any required Prospectus supplement, and as so supplemented or amended to be
filed pursuant to Rule 424 (or any similar provisions then in force) promulgated
under the Securities Act; (iii) respond as promptly as practicable to any
comments received from the Commission with respect to the Registration Statement
or any amendment thereto and promptly provide the Holders true and complete
copies of all correspondence from and to the Commission relating to the
Registration Statement; and (iv) comply with the provisions of the Securities
Act and the Exchange Act with respect to the disposition of all Registrable
Securities covered by the Registration Statement during the applicable period in
accordance with the intended methods of disposition by the Holders thereof set
forth in the Registration Statement as so amended or in such Prospectus as so
supplemented.
(c) Notify the Holders of Registrable Securities to be sold, their
Special Counsel and any managing underwriters immediately (and, in the case of
(i)(A) below, not less than five (5) days prior to such filing) and (if
requested by any such Person) confirm such notice in writing no later than one
(1) Business Day following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to the Registration Statement is proposed
to be filed; (B) when the Commission notifies the Company whether there will be
a "review" of such Registration Statement and whenever the Commission comments
in writing on such Registration Statement (the Company shall provide true and
complete copies thereof and all written responses thereto to each of the
Holders) and (C) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; and (vi) of the occurrence of any event that makes
any statement made in the Registration Statement or Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
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material respect or that requires any revisions to the Registration Statement,
Prospectus or other documents so that, in the case of the Registration Statement
or the Prospectus, as the case may be, it will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Purchaser
acknowledges that it and its counsel have been informed that the Company has
been informed that the Registration Statement would be "reviewed" and that such
"review" was not to commence until the Company filed its annual report on Form
10-K for the year ended December 31, 1997, which the Company filed with the
Commission on April 24, 1998.
(d) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of the
Registration Statement or (ii) any suspension of the qualification (or exemption
from qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(e) If requested by any managing underwriter or the Holders of a
majority in interest of the Registrable Securities to be sold in connection with
an Underwritten Offering, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as such
managing underwriters and such Holders reasonably agree should be included
therein and (ii) make all required filings of such Prospectus supplement or such
post-effective amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such Prospectus supplement or
post-effective amendment; provided, however, that the Company shall not be
required to take any action pursuant to this Section 3(e) that would, in the
opinion of counsel for the Company, violate applicable law or be materially
detrimental to the business prospects of the Company.
(f) Furnish to each Holder, their Special Counsel and any managing
underwriters, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by
reference, and all exhibits to the extent reasonably requested by such Person
(including those previously furnished or incorporated by reference) promptly
after the filing of such documents with the Commission.
(g) Promptly deliver to each Holder, their Special Counsel, and any
underwriters, without charge, as many copies of the Prospectus or Prospectuses
(including each form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request; and the Company hereby consents to the use
of such Prospectus and each amendment or supplement thereto by each of the
selling Holders and any underwriters in connection with the offering and sale of
the Registrable Securities covered by such Prospectus and any amendment or
supplement thereto, provided that the manner of such offering shall be as
described in such prospectus.
(h) Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Holders, any
underwriters and their Special Counsel
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in connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions as any Holder or
underwriter requests in writing, to keep each such registration or qualification
(or exemption therefrom) effective during the Effectiveness Period and to do any
and all other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Registrable Securities covered by a Registration
Statement; provided, however, that the Company shall not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or to take any action that would subject it to general service of process in any
such jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
(i) Cooperate with the Holders and any managing underwriters to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold pursuant to a Registration Statement, which
certificates shall be free of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in such names
as any such managing underwriters or Holders may request at least three Business
Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as practicable, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(k) Use its best efforts to cause all Registrable Securities relating
to such Registration Statement to be listed on the Nasdaq SmallCap Market and
any other securities exchange, quotation system, market or over-the-counter
bulletin board, if any, on which similar securities issued by the Company are
then listed as and when required pursuant to the Purchase Agreement.
(l) In the case of an Underwritten Offering, enter into such
customary agreements on terms which are customary in connection with such
transactions (including an underwriting agreement in form, scope and substance
as is customary in Underwritten Offerings) and take all such other actions in
connection therewith (including those reasonably requested by any managing
underwriters and the Holders of a majority of the Registrable Securities being
sold) in order to expedite or facilitate the disposition of such Registrable
Securities, and whether or not an underwriting agreement is entered into, (i)
make such representations and warranties to such Holders and such underwriters
as are customarily made by issuers to underwriters in underwritten public
offerings, and confirm the same if and when requested; (ii) obtain and deliver
copies thereof to each Holder and the managing underwriters, if any, of opinions
of counsel to the Company and updates
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thereof addressed to each selling Holder and each such underwriter, in form,
scope and substance reasonably satisfactory to any such managing underwriters
and Special Counsel to the selling Holders covering the matters customarily
covered in opinions requested in Underwritten Offerings and such other matters
as may be reasonably requested by such Special Counsel and underwriters; (iii)
immediately prior to the effectiveness of the Registration Statement or at the
time of delivery of any Registrable Securities sold pursuant thereto (at the
option of the underwriters), obtain and deliver copies to the Holders and the
managing underwriters, if any, of "cold comfort" letters and updates thereof
from the independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any subsidiary
of the Company or of any business acquired by the Company for which financial
statements and financial data is, or is required to be, included in the
Registration Statement), addressed to each Person and in such form and substance
as are customary in connection with Underwritten Offerings; (iv) if an
underwriting agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable to the selling Holders and the
underwriters, if any, than those set forth in Section 5 (or such other
provisions and procedures acceptable to the managing underwriters, if any, and
holders of a majority of Registrable Securities participating in such
Underwritten Offering; and (v) deliver such documents and certificates as may be
reasonably requested by the Holders of a majority of the Registrable Securities
being sold, their Special Counsel and any managing underwriters to evidence the
continued validity of the representations and warranties made pursuant to clause
3(l)(i) above and to evidence compliance with any customary conditions contained
in the underwriting agreement or other agreement entered into by the Company.
(m) Make available for inspection by the selling Holders, a
representative of such Holders, an underwriter participating in any disposition
of Registrable Securities, and an attorney or accountant retained by such
selling Holders or underwriters, at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
officers, directors, agents and employees of the Company and its subsidiaries to
supply all information in each case requested by any such Holder,
representative, underwriter, attorney or accountant in connection with the
Registration Statement; provided, however, that any information that is
determined in good faith by the Company in writing to be of a confidential
nature at the time of delivery of such information shall be kept confidential by
such Persons, unless (i) disclosure of such information is required by court or
administrative order or is necessary to respond to inquiries of regulatory
authorities; (ii) disclosure of such information, in the opinion of counsel to
such Person, is required by law; (iii) such information becomes generally
available to the public other than as a result of a disclosure or failure to
safeguard by such Person; or (iv) such information becomes available to such
Person from a source other than the Company and such source is not known by such
Person to be bound by a confidentiality agreement with the Company.
(n) Comply with all applicable rules and regulations of the
Commission and make generally available to its security holders earning
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 not later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at
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the end of any fiscal quarter in which Registrable Securities are sold to
underwriters in a firm commitment or best efforts Underwritten Offering and (ii)
if not sold to underwriters in such an offering, commencing on the first day of
the first fiscal quarter of the Company after the effective date of the
Registration Statement, which statement shall cover said 12-month period, or end
shorter periods as is consistent with the requirements of Rule 158.
(o) The Company may require each selling Holder to furnish to the
Company such information regarding the distribution of such Registrable
Securities and the beneficial ownership of Common Stock held by such selling
Holder as is required by law to be disclosed in the Registration Statement and
the Company may exclude from such registration the Registrable Securities of any
such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar Federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
(p) Each Holder agrees by its acquisition of the Registrable
Securities that (i) it will not offer or sell any Registrable Securities under
the Registration Statement until it has received copies of the Prospectus as
then amended or supplemented as contemplated in Section 3(g) and notice from the
Company that such Registration Statement and any post-effective amendments
thereto have become effective as contemplated by Section 3(c) and (ii) it will
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.
(q) The Company may require each Holder whose Registrable Securities
are to be included in the Registration Statement, as a condition to such
inclusion, to confirm in writing that such Registrable Securities will be
distributed only as set forth in the Registration Statement.
Each Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Company of the occurrence of any event
of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or
3(c)(vi), such Holder will forthwith discontinue disposition of such Registrable
Securities until such Holder's receipt of the copies of the supplemented
Prospectus and/or amended Registration Statement contemplated by Section 3(j),
or until it is advised in writing (the "Advice") by the Company that the use of
the applicable Prospectus may be resumed, and, in either case, has received
copies of any additional or supplemental filings that are incorporated or deemed
to be incorporated by reference in such Prospectus or Registration Statement.
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4. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall, except as and to the extent
specified in Section 4(b), be borne by the Company whether or not pursuant to an
Underwritten Offering and whether or not the Registration Statement is filed or
becomes effective and whether or not any Registrable Securities are sold
pursuant to the Registration Statement. The fees and expenses referred to in
the foregoing sentence shall include, without limitation, (i) all registration
and filing fees (including, without limitation, fees and expenses (A) with
respect to filings required to be made with the Nasdaq SmallCap Market and each
other securities exchange or market on which Registrable Securities are required
hereunder to be listed and (B) in compliance with state securities or Blue Sky
laws (including, without limitation, fees and disbursements of counsel for the
underwriters or Holders in connection with Blue Sky qualifications of the
Registrable Securities and determination of the eligibility of the Registrable
Securities for investment under the laws of such jurisdictions as the managing
underwriters, if any, or the Holders of a majority of Registrable Securities may
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses if
the printing of prospectuses is requested by the managing underwriters, if any,
or by the holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company and Special Counsel for the
Holders (not to exceed $15,000 in the case of such Special Counsel), (v)
Securities Act liability insurance, if the Company so desires such insurance,
and (vi) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement. In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
(b) If the Holders require an Underwritten Offering pursuant to the
terms hereof, the Company shall be responsible for all costs, fees and expenses
in connection therewith, except for the fees and disbursements of the
Underwriters (including any underwriting commissions and discounts) and their
legal counsel and accountants. By way of illustration which is not intended to
diminish from the provisions of Section 4(a), the Holders shall not be
responsible for, and the Company shall be required to pay the fees or
disbursements incurred by the Company (including by its legal counsel and
accountants) in connection with, the preparation and filing of a Registration
Statement and related Prospectus for such offering, the maintenance of such
Registration Statement in accordance with the terms hereof, the listing of the
Registrable Securities in accordance with the requirements hereof, and printing
expenses incurred to comply with the requirements hereof.
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5. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents (including any underwriters
retained by such Holder in connection with the offer and sale of Registrable
Securities), brokers (including brokers who offer and sell Registrable
Securities as principal as a result of a pledge or any failure to perform under
a margin call of Common Stock), investment advisors and employees of each of
them, each Person who controls any such Holder (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, settlements, judgments, costs (including, without
limitation, costs of preparation and reasonable attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or relating to any untrue
or alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to the
Company by or on behalf of such Holder expressly for use therein, or to the
extent that such information relates to such Holder or such Holder's proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto. The Company shall notify the Holders promptly of the
institution, threat or assertion of any Proceeding of which the Company is aware
in connection with the transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of or based solely upon any untrue
statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or arising solely out of or based solely
upon any omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading to the extent, but only to the
extent, that such untrue statement or omission is contained in any information
so furnished in writing by such Holder to the Company specifically for inclusion
in the Registration Statement or such Prospectus or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus. In no event shall the liability of any
selling
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Holder hereunder be greater in amount than the dollar amount of the net proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within 30 Business
Days of written notice thereof to the Indemnifying Party (regardless of whether
it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
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(d) Contribution. If a claim for indemnification under Section 5(a)
or 5(b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5(d), the Purchaser
shall not be required to contribute, in the aggregate, any amount in excess of
the amount by which the proceeds actually received by the Purchaser from the
sale of the Registrable Securities subject to the Proceeding exceeds the
amount of any damages that the Purchaser has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement.
The Company and each Holder agree that monetary damages would not provide
adequate compensation for any losses incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby further agrees that, in the event
of any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
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(b) No Inconsistent Agreements. Except as and to the extent
specifically set forth in Schedule 6(b) attached hereto, neither the Company nor
any of its subsidiaries has, as of the date hereof, nor shall the Company or any
of its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Except as and to the extent specifically set forth in
Schedule 6(b) attached hereto, neither the Company nor any of its subsidiaries
has previously entered into any agreement granting any registration rights with
respect to any of its securities to any Person. Without limiting the generality
of the foregoing, without the written consent of the Holders of a majority of
the then outstanding Registrable Securities, the Company shall not grant to any
Person the right to request the Company to register any securities of the
Company under the Securities Act unless the rights so granted are subject in all
respects to the prior rights in full of the Holders set forth herein, and are
not otherwise in conflict or inconsistent with the provisions of this Agreement.
(c) No Piggyback on Registrations. Except as and to the extent
specifically set forth in Schedule 6(b) attached hereto or the Initial
Registration Statement (but not any amendments or supplements thereto, other
than with respect to the transactions contemplated herein), neither the Company
nor any of its security holders (other than the Holders in such capacity
pursuant hereto) may include securities of the Company in the Registration
Statement other than the Registrable Securities, and the Company shall not enter
into any agreement providing any such right to any of its securityholders.
(d) Piggy-Back Registrations. If at any time during the
Effectiveness Period there is not an effective Registration Statement covering
all of the Registrable Securities and the Company shall determine to prepare and
file with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under
the Securities Act) or their then equivalents relating to equity securities to
be issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each holder of Registrable
Securities written notice of such determination and, if within twenty (20) days
after receipt of such notice, any such holder shall so request in writing, the
Company shall include in such registration statement all or any part of the
Registrable Securities such holder requests to be registered. No right to
registration of Registrable Securities under this Section shall be construed to
limit any registration otherwise required hereunder.
(e) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least a majority of the then outstanding Registrable
Securities; provided, however, that, for the purposes of this sentence,
Registrable Securities that are owned, directly or indirectly, by the Company,
or an Affiliate of the Company are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions
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hereof with respect to a matter that relates exclusively to the rights of
Holders and that does not directly or indirectly affect the rights of other
Holders may be given by Holders of at least a majority of the Registrable
Securities to which such waiver or consent relates; provided, however, that the
provisions of this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the immediately preceding sentence.
(f) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 7:00 p.m. (New
York City time) on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in the Purchase Agreement later than 7:00
p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the Business Day following the date of mailing, if
sent by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given. The address
for such notices and communications shall be as follows:
If to the Company: Global Intellicom, Inc.
747 Third Avenue
New York, NY 10017
Facsimile No.: (212) 750-2320
Attn: President
With copies to: Rosner, Bresler, Goodman & Unterman, LLP
521 Fifth Avenue
New York, NY 10175
Facsimile No.: (212) 949-6131
Attn: Andrew J. Goodman
If to the Purchaser: JNC Opportunity Fund Ltd.
c/o Olympia Capital (Cayman) Ltd.
Williams House, 20 Reid Street
Hamilton HM11, Bermuda
Facsimile No.: (441) 295-2305
Attn: Director
With copies to (for Encore Capital Management, L.L.C.
communications to 12007 Sunrise Valley Drive, Suite 460
either Purchaser): Reston, VA 20191
Facsimile No.: (703) 476-7711
Attn: Managing Member
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-and-
Robinson Silverman Pearce Aronsohn &
Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630
Attn: Eric L. Cohen
If to any other Person who is then the registered Holder:
To the address of such Holder as it appears in the
stock transfer books of the Company
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
(g) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. The Purchaser may assign its respective rights hereunder in the
manner and to the Persons as permitted under the Purchase Agreement.
(h) Assignment of Registration Rights. The rights of the Purchaser
hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by the Purchaser to any assignee or transferee of all
or a portion of the Debentures or the Warrants without the consent of the
Company if: (i) the Purchaser agrees in writing with the transferee or assignee
to assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such assignment, (ii) the Company is, within a
reasonable time after such transfer or assignment, furnished with written notice
of (a) the name and address of such transferee or assignee, and (b) the
securities with respect to such registration rights are being transferred or
assigned, (iii) at or before the time the Company receives the written notice
contemplated by clause (ii) of this Section, the transferee or assignee agrees
in writing with the Company to be bound by all of the provisions of this
Agreement, and (iv) such transfer shall have been made in accordance with the
applicable requirements of the Purchase Agreement. The rights to assignment
shall apply to the Purchaser's (and to subsequent) successors and assigns.
(i) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement.
In the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
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(j) Governing Law; Submission to Jurisdiction. This Agreement shall
be governed by and construed in accordance with the laws of the State of New
York, without regard to principles of conflicts of law. Each party hereby
irrevocably submits to the exclusive jurisdiction of any New York state court
sitting in the Borough of Manhattan, the state and federal courts sitting in the
City of New York or any federal court sitting in the Borough of Manhattan in the
City of New York (collectively, the "New York Courts") in respect of any
Proceeding arising out of or relating to this Agreement, and irrevocably accepts
for itself and in respect of its property, generally and unconditionally,
jurisdiction of the New York Courts. The Company irrevocably waives to the
fullest extent it may effectively do so under applicable law any objection that
it may now or hereafter have to the laying of the venue of any such proceeding
brought in any New York Court and any claim that any such Proceeding brought in
any New York Court has been brought in an inconvenient forum. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law.
(k) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(m) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(n) Shares Held by The Company and its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than the Purchaser or transferees or successors or assigns
thereof if such Persons are deemed to be Affiliates solely by reason of their
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
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SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
GLOBAL INTELLICOM, INC.
By: /s/ N. Norman Muller
-----------------------------
Name: N. Norman Muller
Title: Chief Executive Officer
JNC OPPORTUNITY FUND LTD.
By: /s/ Thomas H. Davis
-----------------------------
Name: Thomas H. Davis
Title: Director
