EXHIBIT 10.2
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FORM OF CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
Among
COMMODORE HOLDINGS LIMITED
and
THE INVESTORS SIGNATORY HERETO
Dated as of ________, 2000
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CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "AGREEMENT"),
dated as of ________, 2000, among Commodore Holdings Limited, a Bermuda
corporation (the "COMPANY"), and the investors signatory hereto (each such
investor is a "PURCHASER" and all such investors are, collectively, the
"PURCHASERS").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers and the
Purchasers, severally and not jointly, desire to purchase from the Company,
shares of the Company's Series C Convertible Preferred Stock, par value $.01 per
share (the "PREFERRED STOCK"), which are convertible into shares of the
Company's common stock, par value $.01 per share (the "COMMON STOCK").
IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy are
hereby acknowledged, the Company and the Purchasers agree as follows:
ARTICLE I
PURCHASE AND SALE
I.1 THE CLOSING.
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(a) THE CLOSING. (i) Subject to the terms and conditions set
forth in this Agreement, the Company shall issue and sell to the Purchasers and
the Purchasers shall, severally and not jointly, purchase _______ shares of
Preferred Stock (the "SHARES") for an aggregate purchase price of __________.
The closing of the purchase and sale of the Shares (the "CLOSING") shall take
place at ______________________________________________________________,
immediately following the execution hereof or such later date as the parties
shall agree. The date of the Closing is hereinafter referred to as the "CLOSING
DATE."
(ii) On the Closing Date, the parties shall deliver
or shall cause to be delivered the following: (A) the Company shall deliver to
each Purchaser (1) stock certificates, registered in the name of such Purchaser,
representing a number of Shares equal to the quotient obtained by dividing the
purchase price indicated below such Purchaser's name on the signature page to
this Agreement by 10,000, (2) a Common Stock purchase warrant, in the form of
EXHIBIT D, registered in the name of such Purchaser, pursuant to which such
Purchaser shall have the right to acquire the number of shares of Common Stock
indicated below such Purchaser's name on the signature page to this Agreement
(collectively, the "WARRANTS"), (3) the legal opinion of Broad and Xxxxxx,
counsel to the Company in the form of EXHIBIT C, and (4) an executed
Registration Rights Agreement, dated the date hereof, among the Company and the
Purchasers, in the form of EXHIBIT B (the "REGISTRATION RIGHTS AGREEMENT") and
the Transfer Agent Instructions, in the form of EXHIBIT E, delivered to and
acknowledged by the Company's transfer agent (the "TRANSFER AGENT
INSTRUCTIONS"); and (B) each Purchaser shall deliver (1) the purchase price
indicated below such Purchaser's name on the signature page to this Agreement in
United States dollars in immediately
available funds by wire transfer to an account designated in writing by the
Company for such purpose, and (2) an executed Registration Rights Agreement.
I.2 TERMS OF PREFERRED STOCK. The Preferred Stock shall have
the rights preferences and privileges set forth in EXHIBIT A, and shall be
incorporated into a Certificate of Designation (the "CERTIFICATE OF
DESIGNATION") which shall be filed on or prior to the Closing Date by the
Company in its books and records with its constituent documents, in form and
substance mutually agreed to by the parties.
I.3 CERTAIN DEFINED TERMS. For purposes of this Agreement,
"CONVERSION PRICE," "ORIGINAL ISSUE DATE" and "TRADING DAY" shall have the
meanings set forth in EXHIBIT A; "BUSINESS DAY" shall mean any day except
Saturday, Sunday and any day which shall be a federal legal holiday or a day on
which banking institutions in the State of New York or the State of Florida are
authorized or required by law or other governmental action to close; "PERSON"
means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
II.1 REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company hereby makes the following representations and warranties to the
Purchasers:
(a) ORGANIZATION AND QUALIFICATION. The Company is an exempted
company duly incorporated, validly existing and in good standing under the laws
of Bermuda, 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 the exhibits to its
annual report for its fiscal year ended September 30, 1999, as filed with the
Securities and Exchange Commission (the "1999 FORM 10-K") (collectively the
"SUBSIDIARIES"). Each of the Subsidiaries is an entity, duly incorporated or
otherwise organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own and use its properties and assets and to
carry on its business as currently conducted. Each of the Company and the
Subsidiaries is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
could not, individually or in the aggregate, (x) adversely affect the legality,
validity or enforceability of the Securities (as defined below) or any of this
Agreement, the Registration Rights Agreement, the Transfer Agent Instructions or
the Warrants (collectively, the "TRANSACTION DOCUMENTS"), (y) have or result in
a material adverse effect on the results of operations, assets, prospects, or
condition (financial or otherwise) of the Company and the Subsidiaries, taken as
a whole, or (z) adversely impair the Company's ability to perform on a timely
basis its obligations under any of the Transaction Documents (any of (x), (y) or
(z), a "MATERIAL ADVERSE EFFECT").
(b) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company. Each of
the Transaction Documents has been duly executed by the Company and, when
delivered (or filed, as the case may be) in accordance with the terms hereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, by-laws or other organizational or
charter documents. The laws of Bermuda permit the payment of dividends as
contemplated by the Certificate of Designation.
(c) CAPITALIZATION. Prior to the consummation of the
transactions contemplated hereby, 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 a result of the purchase and sale of the Shares
and the Warrants and except as disclosed in Schedule 2.1(c) and in Note H to the
Consolidated Financial Statements of the 1999 Form 10-K and Item 2 of the
Company's quarterly report on Form 10-Q for the quarter ended December 31, 1999
as filed with the Securities and Exchange Commission, there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exchangeable for, or giving any Person (as defined below)
any right to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
(d) ISSUANCE OF THE SHARES AND THE WARRANTS. The Shares and
the Warrants are duly authorized and, when issued and paid for in accordance
with the terms hereof, will be duly and validly issued, fully paid and
nonassessable, free and clear of all liens, encumbrances and rights of first
refusal of any kind (collectively, "LIENS"). The Company has on the date hereof
and will, at all times while the Shares and the Warrants are outstanding,
maintain an adequate reserve of duly authorized shares of Common Stock, reserved
for issuance to the holders of the Shares and the Warrants, to enable it to
perform its conversion, exercise and other obligations under this Agreement, the
Certificate of Designation (assuming for such purposes that the Shares are
outstanding for three (3) years and that all dividends are added to the Stated
Value (as defined in the Certificate of Designation) (which shall not be less
than 655,555) and the Warrants. All such authorized shares of Common Stock shall
be duly reserved for issuance to the holders of the Shares and the Warrants. The
shares of Common Stock issuable upon conversion of the Shares and upon exercise
of the Warrants are collectively referred to herein as the "UNDERLYING SHARES."
The Shares, the Warrants and the Underlying Shares are collectively referred to
herein as, the "SECURITIES." When issued in
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accordance with the Certificate of Designation and the Warrants, the Underlying
Shares will be duly authorized, validly issued, fully paid and nonassessable,
free and clear of all Liens.
(e) NO CONFLICTS. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other charter documents (each as amended
through the date hereof), or (ii) subject to obtaining the Required Approvals
(as defined below), conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any agreement, credit facility,
debt or other instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or asset of the
Company is bound or affected; except in the case of each of clauses (ii) and
(iii), as could not, individually or in the aggregate, have or result in a
Material Adverse Effect. The business of the Company is not being conducted in
violation of any law, ordinance or regulation of any governmental authority,
except for violations which, individually or in the aggregate, could not have or
result in a Material Adverse Effect.
(f) FILINGS, CONSENTS AND APPROVALS. Neither the Company nor
any Subsidiary is required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court or
other federal, state, local or other governmental authority (excluding any
foreign securities filing with any Purchaser's country of organization or
residence, the need for which the Company makes no representation in connection
herewith) or other Person in connection with the execution, delivery and
performance by the Company of the Transaction Documents, other than (i) the
filings required pursuant to Section 3.8, (ii) the filing with the Securities
and Exchange Commission (the "Commission") of a registration statement meeting
the requirements set forth in the Registration Rights Agreement and covering the
resale of the Underlying Shares by the Purchasers (the "UNDERLYING SHARES
REGISTRATION STATEMENT"), (iii) the application(s) to the Nasdaq National Market
("NASDAQ") for the listing of the Underlying Shares for trading on the NASDAQ
(and with any other national securities exchange or market on which the Common
Stock is then listed), (iv) applicable Blue Sky filings and (v) in all other
cases where the failure to obtain such consent, waiver, authorization or order,
or to give such notice or make such filing or registration could not have or
result in, individually or in the aggregate, a Material Adverse Effect
(collectively, the "REQUIRED APPROVALS").
(g) LITIGATION; PROCEEDINGS. There is no action, suit,
inquiry, notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or adversely affecting the Company
or any of its Subsidiaries or any of their respective properties before or by
any court, arbitrator, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign) (collectively, an "ACTION")
which (i) adversely affects or
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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, in each case of clauses (i), (ii) or
(iii) above, except as could not individually or in the aggregate, have or
result in a Material Adverse Effect.
(i) PRIVATE OFFERING. Assuming the accuracy of the
representations and warranties of the Purchasers set forth in Sections
2.2(b)-(g), the offer, issuance and sale of the Securities to the Purchasers as
contemplated hereby are exempt from the registration requirements of the
Securities Act of 1933, as amended (the "SECURITIES ACT"). Neither the Company
nor any Person acting on its behalf has taken or is, to the knowledge of the
Company, contemplating taking any action which could subject the offering,
issuance or sale of the Securities to the registration requirements of the
Securities Act including soliciting any offer to buy or sell the Securities by
means of any form of general solicitation or advertising. Bermuda law does not
restrict or prohibit the ability of the Purchasers to own and convert the
Shares, exercise the Warrants or own or trade the Common Stock.
(j) SEC DOCUMENTS; FINANCIAL STATEMENTS. The Company has filed
all reports required to be filed by it under the Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the date hereof (or such shorter period as
the Company was required by law to file such material) (the foregoing materials
being collectively referred to herein as the "SEC DOCUMENTS" and, together with
the Schedules to this Agreement, the "DISCLOSURE MATERIALS") on a timely basis
or has received a valid extension of such time of filing and has filed any such
SEC Documents prior to the expiration of any such extension. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. All material agreements to which the Company is
a party or to which the property or assets of the Company are subject have been
filed as exhibits to the SEC Documents as required. The financial statements of
the Company included in the SEC Documents comply in all material respects with
applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
("GAAP"), except as may be otherwise specified in such financial statements or
the notes thereto, and fairly present in all material respects the financial
position of the
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Company and its consolidated subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, immaterial, year-end audit
adjustments. Since December 31, 1999, except as specifically disclosed in the
SEC Documents, (a) there has been no event, occurrence or development that has
or that could result in a Material Adverse Effect, (b) the Company has not
incurred any liabilities (contingent or otherwise) other than (x) liabilities
incurred in the ordinary course of business consistent with past practice and
(y) liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made with the
Commission, (c) the Company has not altered its method of accounting or the
identity of its auditors and (d) the Company has not declared or made any
payment or distribution of cash or other property to its stockholders or
officers or directors (other than in compliance with existing Company stock
option plans) with respect to its capital stock, or purchased, redeemed (or made
any agreements to purchase or redeem) any shares of its capital stock.
(k) INVESTMENT COMPANY. The Company is not, and is not an
Affiliate (as defined in Rule 405 under the Securities Act) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(l) CERTAIN FEES. Except for certain fees payable to X.X.
Xxxxxxxxxx & Co., Inc. by the Company, no fees or commissions will be payable by
the Company to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement. The Company
shall indemnify and hold harmless the Purchasers, their employees, officers,
directors, agents, and partners, and their respective Affiliates, from and
against all claims, losses, damages, costs (including the costs of preparation
and attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as such fees and expenses are incurred, by any Person not engaged
in writing by the Purchasers.
(m) SOLICITATION MATERIALS. Neither the Company nor any Person
acting on the Company's behalf has solicited any offer to buy or sell the
Securities by means of any form of general solicitation or advertising.
(n) FORM S-3 ELIGIBILITY. The Company is eligible to register
securities for resale in secondary transactions with the Commission under Form
S-3 promulgated under the Securities Act.
(o) SENIORITY. No class of equity securities of the Company is
senior to the Shares in right of payment, whether upon liquidation or
dissolution, or otherwise.
(p) LISTING AND MAINTENANCE REQUIREMENTS COMPLIANCE. Except as
set forth in the SEC Documents, the Company has not, in the two years preceding
the date hereof, received notice (written or oral) from the NASDAQ or any other
stock exchange, market or trading facility
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on which the Common Stock is or has been listed (or on which it has been quoted)
to the effect that the Company is not in compliance with the listing or
maintenance requirements of such exchange or market. The Company is, and has no
reason to believe that it will not in the foreseeable future continue to be, in
compliance with all such listing and maintenance requirements.
(q) PATENTS AND TRADEMARKS. The Company and its Subsidiaries
have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses and
rights which are necessary or material for use in connection with their
respective business as described in the SEC Documents and which the failure to
so have would have a Material Adverse Effect (collectively, the "INTELLECTUAL
PROPERTY RIGHTS"). Neither the Company nor any Subsidiary has received a written
notice that the Intellectual Property Rights used by the Company or its
Subsidiaries violates or infringes upon the rights of any Person, to the best
knowledge of the Company. To the best knowledge of the Company, all such
Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights.
(r) REGISTRATION RIGHTS; RIGHTS OF PARTICIPATION. Except as
set forth on SCHEDULE 6(B) to the Registration Rights Agreement, the Company has
not granted or agreed to grant to any Person any rights (including "piggy-back"
registration rights) to have any securities of the Company registered with the
Commission or any other governmental authority which has not been satisfied. No
Person, has any right of first refusal, preemptive right, right of
participation, or any similar right to purchase any of the Securities.
(s) REGULATORY PERMITS. The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
Federal, state or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Documents, except where the
failure to possess such permits could not, individually or in the aggregate,
have or result in a Material Adverse Effect ("MATERIAL PERMITS"), and neither
the Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
(t) TITLE. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them which is
material to the business of the Company and its Subsidiaries and except as set
forth in SCHEDULE 2.1(T) good and marketable title in all personal property
owned by them which is material to the business of the Company and its
Subsidiaries, in each case free and clear of all Liens, except for Liens as do
not materially affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Company and its
Subsidiaries. Any real property and business locations held under lease by the
Company and its Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and its Subsidiaries are in material
compliance and any deviation therefrom do not interfere with the use made and
proposed to be made of such property and buildings by the Company and its
Subsidiaries.
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(u) ABSENCE OF CERTAIN PROCEEDINGS. Except as described in the
SEC Documents, (i) there is no Action pending or, to the knowledge of the
Company, threatened against the Company, in any such case wherein an unfavorable
decision, ruling or finding could have or result in a Material Adverse Effect;
(ii) neither the Company nor any Subsidiary, nor any director or officer
thereof, is or has been the subject of any Action involving (A) a claim of
violation of or liability under federal or state securities laws or (B) a claim
of breach of fiduciary duty; (iii) the Company does not have pending before the
Commission any request for confidential treatment of information; and (iv) there
has not been, and to the best of the Company's knowledge there is not pending or
contemplated, any investigation by the Commission involving the Company or any
current or former director or officer of the Company.
(v) LABOR RELATIONS. No material labor problem exists or, to
the knowledge of the Company, is imminent with respect to any of the employees
of the Company.
(w) DISCLOSURE. The Company confirms that neither it nor any
other Person acting on its behalf has provided any of the Purchasers or its
agents or counsel with any information that constitutes or might constitute
material non-public information. The Company understands and confirms that the
Purchasers shall be relying on the foregoing representations in effecting
transactions in securities of the Company. The Transaction Documents and the SEC
Documents constitute all of the disclosure provided to the Purchasers regarding
the Company, its business and the transactions contemplated hereby, including
the Schedules to this Agreement. Such disclosure is true and correct and in all
material respects and does not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
II.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
hereby for itself and for no other Purchaser represents and warrants to the
Company as follows:
(a) ORGANIZATION; AUTHORITY. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The purchase by such Purchaser of the Securities
hereunder has been duly authorized by all necessary action on the part of such
Purchaser. Each of this Agreement and the Registration Rights Agreement has been
duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its
terms.
(b) INVESTMENT INTENT. Such Purchaser is acquiring the
Securities as principal for its own account for investment purposes only and not
with a view to or for distributing or reselling such Securities or any part
thereof, without prejudice, however, to such Purchaser's right, subject to the
provisions of this Agreement and the Registration Rights Agreement, to sell or
otherwise dispose of all or any part of such Securities pursuant to an effective
registration statement under the
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Securities Act and in compliance with applicable federal, foreign and state
securities laws or under an exemption from such registration.
(c) PURCHASER STATUS. At the time such Purchaser was offered
the Shares and its respective Warrants, it was, and at the date hereof it is,
and at each exercise date under its respective Warrants, it will be, an
"accredited investor" as defined in Rule 501(a) under the Securities Act. Such
Purchaser has not been formed solely for the purpose of acquiring the
Securities. Such Purchaser is a resident of the state or country listed on the
signature page of this Agreement.
(d) EXPERIENCE OF SUCH PURCHASER. Such Purchaser, either alone
or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.
(e) ABILITY OF SUCH PURCHASER TO BEAR RISK OF INVESTMENT. Such
Purchaser is able to bear the economic risk of an investment in the Securities
and, at the present time, is able to afford a complete loss of such investment.
(f) ACCESS TO INFORMATION. Such Purchaser acknowledges that it
has reviewed the Disclosure Materials and has been afforded (i) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the Disclosure
Materials. Neither such inquiries nor any other investigation conducted by or on
behalf of such Purchaser or its representatives or counsel shall modify, amend
or affect such Purchaser's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
(g) GENERAL SOLICITATION. Such Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.
(h) RELIANCE. Such Purchaser understands and acknowledges that
(i) the Securities are being offered and sold to it without registration under
the Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Purchaser hereby consents to such
reliance.
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(i) CERTAIN FEES. Except for certain fees payable to X.X.
Xxxxxxxxxx & Co., Inc., by the Company, no Purchaser has agreed in writing to
pay any fee or commission to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other Person in connection
with the transactions contemplated by this Agreement. Such Purchaser shall
indemnify and hold harmless the Company, 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, by any Person engaged in
writing by such Purchaser.
The Company acknowledges and agrees that no Purchaser makes or
has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
III.1 TRANSFER RESTRICTIONS. (a) Securities may only be disposed of
pursuant to an effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from or in a transaction not
subject to the registration requirements of the Securities Act, and in
compliance with any applicable federal, Bermuda and state securities laws. In
connection with any transfer of Securities other than pursuant to an effective
registration statement or to the Company, except as otherwise set forth herein,
the Company may require the transferor thereof to provide to the Company an
opinion of counsel selected by the transferor, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred securities under the
Securities Act or applicable state or Bermuda laws. Notwithstanding the
foregoing, the Company, without requiring a legal opinion as described in the
immediately preceding sentence, hereby consents to and agrees to register on the
books of the Company and with any transfer agent for the securities of the
Company any transfer of Securities by a Purchaser to an Affiliate of such
Purchaser or to one or more funds or managed accounts under common management
with such Purchaser (but in no event shall there be more than 10 such
transfers), and any transfer among any such Affiliates or one or more funds or
managed accounts, provided that the transferee certifies to the Company that it
is an "accredited investor" as defined in Rule 501(a) under the Securities Act
and that it is acquiring the Securities solely for investment purposes (subject
to the qualifications hereof). Any such transferee shall agree in writing to be
bound by the terms of this Agreement and shall have the rights of a Purchaser
under this Agreement and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
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COMMISSION OF ANY STATE OR THE COMMONWEALTH OF BERMUDA IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") AND BERMUDA LAW 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 AND BERMUDA SECURITIES LAWS.
With respect to the Underlying Shares, the following
additional language shall be added to the end of such legend: "AND THE EXISTENCE
OF SUCH EXEMPTION SHALL BE CONFIRMED BY COUNSEL TO THE COMPANY OR A REPUTABLE
SECURITIES COUNSEL OTHER THAN COUNSEL TO THE COMPANY."
Underlying Shares shall not contain the legend set forth above
nor any other legend if the conversion of Shares and exercise of the Warrants or
other issuances of Underlying Shares as contemplated hereby, by the Certificate
of Designation or the Warrants occurs at any time while an Underlying Shares
Registration Statement is effective under the Securities Act (and the Company
has not notified the Purchasers that the Underlying Shares Registration
Statement is not accurate in all respects, which notification has not been
subsequently rescinded) or, in the event there is not an effective Underlying
Shares Registration Statement, at such time, in the opinion of counsel to the
Company, such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the staff of the Commission). The Company shall cause its counsel to issue the
legal opinion included in the Transfer Agent Instructions to the Company's
transfer agent on the day that the Underlying Shares Registration Statement is
declared effective by the Commission. The Company agrees that, in the event any
Underlying Shares are issued with a legend in accordance with this Section
3.1(b), it will, within three (3) Trading Days after request therefor by a
Purchaser, provide such Purchaser with a certificate or certificates
representing such Underlying Shares, free from such legend at such time as such
legend is no longer required under this Section 3.1(b). 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.
III.2 FURNISHING OF INFORMATION. As long as the Purchasers own
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act. As long as the Purchasers own Securities, if
the Company is not required to file reports pursuant to such sections, it will
prepare and furnish to the Purchasers and make publicly available in accordance
with Rule 144(c) promulgated under the Securities Act such information as is
required for the Purchasers to sell the Securities under Rule 144 promulgated
under the Securities Act. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, all to the
extent required from time to time, to enable such holder to sell Underlying
Shares without registration under the Securities Act within the limitation
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of the exemptions provided by Rule 144 promulgated under the Securities Act,
which undertaking shall include providing such holder with any legal opinion
required in connection with such sale. 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.
III.3 INTEGRATION. The Company shall not, and shall use its best
efforts to ensure that, no Affiliate of the Company shall, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers.
III.4 INCREASE IN AUTHORIZED SHARES. If on any date the Company would
be, if a notice of conversion or exercise (as the case may be) were to be
delivered on such date, precluded from (a) issuing (a) the number of Underlying
Shares as would be issuable upon a conversion in full of the Shares, and (b) the
number of Underlying Shares issuable upon exercise in full of the Warrants, in
either case, due to the unavailability of a sufficient number of authorized but
unissued or reserved shares of Common Stock, then the Board of Directors of the
Company shall 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 Purchasers in
order to provide for such number of authorized and unissued shares of Common
Stock to enable the Company to comply with its issuance, conversion exercise and
reservation of shares obligations as set forth in this Agreement, the
Certificate of Designation and the Warrants. In connection therewith, the Board
of Directors shall (a) adopt proper resolutions authorizing such increase, (b)
recommend to and otherwise use its best efforts to promptly and duly obtain
stockholder approval to carry out such resolutions (and hold a special meeting
of the stockholders no later than the earlier to occur of the 60th day after
delivery of the proxy materials relating to such meeting and the 90th day after
request by a holder of Securities to issue the number of Underlying Shares in
accordance with the terms hereof) and (c) within five Business Days of obtaining
such stockholder authorization, file an appropriate amendment to the Company's
certificate or articles of incorporation to evidence such increase.
III.5 RESERVATION AND LISTING OF UNDERLYING SHARES. (a) The Company
shall (i) in the time and manner required by NASDAQ and such other exchange,
market or quotation system on which the Common Stock is traded, prepare and file
with the NASDAQ (and such other national securities exchange or market or
trading or quotation facility on which the Common Stock is then listed) an
additional shares listing application covering a number of shares of Common
Stock to satisfy its obligations under Section 2.1(d), (ii) take all steps
necessary to cause such shares of Common Stock to be approved for listing in the
NASDAQ (as well as on any such other national securities exchange or market or
trading or quotation facility on which the Common Stock is then listed) as soon
as possible thereafter, and (iii) provide to the Purchasers evidence of such
listing, and the Company shall maintain the listing of its Common Stock thereon.
If the number of Underlying Shares issuable upon conversion in full of the then
outstanding Shares and upon exercise of the then unexercised portion of the
Warrants exceeds 85% of the number of Underlying Shares previously listed on
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account thereof with NASDAQ (and any such other required exchanges), then the
Company shall take the necessary actions to immediately list a number of
Underlying Shares to bring such number of listed shares in full compliance with
this Section.
(b) The Company shall maintain a reserve of shares of Common
Stock for issuance upon the conversion of the Shares in full and upon exercise
in full of the Warrants in accordance with this Agreement, the Certificate of
Designation and the Warrants, respectively.
III.6 CONVERSION AND EXERCISE PROCEDURES. The Transfer Agent
Instructions, Conversion Notice (as defined in the Certificate of Designation),
Section 5 of the Certificate of Designation, Section 3 of the Warrants and
Notice of Exercise under the Warrants set forth the totality of the procedures
with respect to the conversion of the Shares and exercise of the Warrants,
including the form of legal opinion, if necessary, that shall be rendered to the
Company's transfer agent and such other information and instructions as may be
reasonably necessary to enable the Purchasers to convert their Shares and
exercise their Warrants as contemplated in the Certificate of Designation and
the Warrants (as applicable).
III.7 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 Purchasers promptly after the filing thereof. The Company
shall, no less than two (2) Business Days prior to the filing of such Form D,
provide a copy thereof to the Purchasers. No such filing or disclosure may be
made that mentions the Purchasers by name without the prior consent of the
Purchasers. The Company and the Purchasers shall consult with each other in
issuing any press releases or otherwise making public statements or filings and
other communications with the Commission or any regulatory agency or stock
market or trading facility with respect to the transactions contemplated hereby
and neither party shall issue any such press release or otherwise make any such
public statement, filings or other communications without the prior written
consent of the other, which consent shall not be unreasonably withheld or
delayed, except that no prior consent shall be required if such disclosure is
required by law, in which such case the disclosing party shall provide the other
party with prior notice of such public statement, filing or other communication.
Notwithstanding the foregoing, the Company shall not publicly disclose the names
of the Purchasers, or include the names of the Purchasers in any filing with the
Commission, or any regulatory agency, trading facility or stock market without
the prior written consent of the Purchasers, except to the extent such
disclosure (but not any disclosure as to the controlling Persons thereof) is
required by law, in which case the Company shall provide the Purchasers with
prior notice of such disclosure.
III.8 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 the Company's debt (other than payment of trade
payables in the ordinary course of the Company's business and prior practices),
to redeem any Company equity or equity-equivalent securities or to settle any
outstanding litigation.
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III.9 REIMBURSEMENT. If any Purchaser, other than by reason of its
breach of the Transaction Documents or its gross negligence or willful
misconduct, becomes involved in any capacity in any action, proceeding or
investigation brought by or against any Person (other than a Purchaser),
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 such Purchaser for its reasonable legal (for purposes
hereof, the customary fees of Xxxxxxxx Xxxxxxxxx shall be deemed reasonable) and
other expenses (including the cost of any investigation and preparation)
incurred in connection therewith, as such expenses are incurred. In addition,
other than with respect to any matter in which a Purchaser is a named party, the
Company will pay such Purchaser the charges, as reasonably determined by such
Purchaser, for the time of any officers or employees of such Purchaser devoted
to appearing and preparing to appear as witnesses, assisting in preparation for
hearings, trials or pretrial matters, or otherwise with respect to inquiries,
hearings, trials, and other proceedings relating to the subject matter of this
Agreement. The reimbursement obligations of the Company under this paragraph
shall be in addition to any liability which the Company may otherwise have,
shall extend upon the same terms and conditions to any Affiliates of the
Purchasers who are actually named in such action, proceeding or investigation,
and partners, directors, agents, employees and controlling persons (if any), as
the case may be, of the Purchasers and any such Affiliate, and shall be binding
upon and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company in connection with or as a result of the consummation of
the Transaction Documents except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the Purchasers
breach of the Transaction Documents gross negligence or willful misconduct of
the applicable Purchaser or entity in connection with the transactions
contemplated by this Agreement.
III.10 SHAREHOLDERS RIGHTS PLAN. Assuming that the Purchasers do not
own any securities of the Company prior to their purchase of the Securities,
neither the consummation of the transactions contemplated hereby nor the
issuance of the Underlying Shares will cause the Purchasers to be deemed an
"Acquiring Person" under the Company's stockholder rights plan.
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ARTICLE IV
MISCELLANEOUS
IV.1 FEES AND EXPENSES. At the Closing, the Company shall reimburse the
Purchasers for their legal fees and expenses incurred in connection with the
preparation and negotiation of the Transaction Documents by paying to Xxxxxxxx
Xxxxxxxxx $20,000 for the preparation and negotiation of the Transaction
Documents. The amount contemplated by the immediately preceding sentence shall
be retained by the Purchasers and shall not be delivered to the Company at the
Closing. Other than the amount contemplated in the immediately preceding
sentence, and except as otherwise set forth in the Registration Rights
Agreement, each party shall pay the fees and expenses of its own 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.
IV.2 ENTIRE AGREEMENT; AMENDMENTS. The Transaction Documents, together
with the Exhibits and Schedules thereto and the Transfer Agent Instructions
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties acknowledge have been
merged into such documents, exhibits and schedules.
IV.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 6:30 p.m. (New York City
time) on a Business Day (with confirmation of transmission), (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 this Agreement
later than 6:30 p.m. (New York City time) on any date and earlier than 11:59
p.m. (New York City time) on such date (with confirmation of transmission),
(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: Commodore Holding Limited
0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000-X
Xxxxxxxxx, XX 00000
Facsimile No.: 000-000-0000
Attn: Chief Financial Officer
With copies to: Xxxxxxxx X. Deutsch, P.A.
Broad and Xxxxxx
000 X. Xxxxxxxx Xxxxxxxxx
Xxxxx 0000
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Xxxxx, Xxxxxxx 00000
Facsimile No.: 000-000-0000
If to a Purchaser: To the address and facsimile number set
forth under such Purchaser's name on the
signature pages hereto.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
IV.4 AMENDMENTS; WAIVERS. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each of the Purchasers or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
IV.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.
IV.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Except as set forth in
Section 3.1(a), the Purchasers may not assign this Agreement or any of the
rights or obligations hereunder without the prior written consent of the
Company.
IV.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.
IV.8 GOVERNING LAW. The corporate laws of Bermuda shall govern all
issues concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. 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 the 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 such suit, action or proceeding is
improper. Each party hereby irrevocably waives
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personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) 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.
IV.9 SURVIVAL. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery and
conversion or exercise (as the case may be) of the Shares and the Warrants.
IV.10 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
IV.11 SEVERABILITY. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
IV.12 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers will be entitled to specific performance of the obligations of the
Company under the Transaction Documents. The Company and each of the Purchasers
agree that monetary damages may not be adequate compensation for any loss
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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IV.13 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser under any Transaction Document is several and not
joint with the obligations of any other Purchaser and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert with respect to such obligations or
the transactions contemplated by the Transaction Document. Each Purchaser shall
be entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOWS]
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Stock Purchase Agreement
IN WITNESS WHEREOF, the parties hereto have caused this
Convertible Preferred Stock Purchase Agreement to be duly executed by their
respective authorized signatories as of the date first indicated above.
COMMODORE HOLDINGS LIMITED
By:_____________________________________
Name:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASERS FOLLOWS]
______________________________
By:_____________________________________
Name: __________________________
Title: _________________________
Purchase Price for Shares to be acquired at Closing: __________
Number of Shares underlying Warrant: __________
Address for Notice:
TERMS OF PREFERRED STOCK
Section 1. DESIGNATION, AMOUNT AND PAR VALUE. The series of preferred
stock shall be designated as its Series C Convertible Preferred Stock (the
"PREFERRED STOCK") and the number of shares so designated shall be 300 (which
shall not be subject to increase without the consent of the holders of the
Preferred Stock (each, a "HOLDER" and collectively, the "HOLDERS")). Each share
of Preferred Stock shall have a par value of $.01 and a stated value equal to
the sum of $10,000 plus all accrued dividends to the date of determination to
the extent not previously paid in cash in accordance with the terms hereof (the
"STATED VALUE").
Section 2. DIVIDENDS.
---------
(a) Holders shall be entitled to receive, out of funds legally
available therefor, and the Company shall pay, cumulative dividends at the rate
per share of 6% per annum (as a percentage of the Stated Value per share),
payable on the Conversion Date (as defined herein) for such share and on each
June 30 and December 31 for so long as such share shall be outstanding,
commencing June 30, 2000 (each of a Conversion Date and such semi-annual dates
are referred to herein as a "DIVIDEND PAYMENT DATE"), commencing on the earlier
to occur of such Conversion Date and June 30, 2000, in cash or shares of Common
Stock (as defined in Section 9). Subject to the terms and conditions herein, the
decision whether to pay dividends hereunder in Common Stock or cash shall be at
the discretion of the Holder. Each Holder shall provide the Company written
notice of its intention to cause the Company to pay dividends in cash or shares
of Common Stock not less than five (5) Trading Days prior to each Dividend
Payment Date for so long as shares of Preferred Stock are outstanding. Failure
to timely provide such written notice shall be deemed an election by such Holder
to receive dividends for such period in cash. Dividends on the Preferred Stock
shall be calculated on the basis of a 360-day year, shall accrue daily
commencing on the Original Issue Date (as defined in Section 9), and shall be
deemed to accrue from such date whether or not earned or declared and whether or
not there are profits, surplus or other funds of the Company legally available
for the payment of dividends. Except as otherwise provided herein, if at any
time the Company pays less than the total amount of dividends then accrued on
account of the Preferred Stock, such payment shall be distributed ratably among
the Holders based upon the number of shares of Preferred Stock held by each
Holder.
(b) So long as any Preferred Stock shall remain outstanding, the
Company shall not redeem, purchase or otherwise acquire directly or indirectly
any preferred stock of the Company that ranks pari passu or is junior to the
Preferred Stock unless it offers to purchase Preferred Stock ratably with such
other preferred stock, nor shall the Company directly or indirectly pay or
declare any dividend or make any distribution with respect to Junior Securities
(as defined in Section 9) (other than a dividend or distribution described in
Section 5 or dividends due and paid in the ordinary course on preferred stock of
the Company at such times when the Company is in compliance with its payment and
other obligations hereunder), nor shall any monies be set aside for or applied
to the purchase or redemption (through a sinking fund or otherwise) of any
preferred stock of the Company that ranks pari passu or is junior to the
Preferred Stock unless the Company offers to the Holders to set aside or apply
such funds to the Preferred Stock ratably with such other preferred stock.
Section 3. VOTING RIGHTS. Except as otherwise provided herein and as
otherwise required by law, the Preferred Stock shall have no voting rights.
However, so long as any shares of Preferred Stock are outstanding, the Company
shall not, without the affirmative vote of the Holders of a majority of the
shares of the Preferred Stock then outstanding, (a) alter or change adversely
the powers, preferences or rights given to the Preferred Stock or alter or amend
this Certificate of Designation, (b) authorize or create any class of stock
ranking as to dividends or distribution of assets upon a Liquidation (as defined
in Section 4) senior to or otherwise pari passu with the Preferred Stock, (c)
amend its certificate or articles of incorporation or other charter documents so
as to affect adversely any rights of the Holders, (d) increase the authorized
number of shares of Preferred Stock, or (e) enter into any agreement with
respect to the foregoing.
Section 4. LIQUIDATION. Upon any liquidation, dissolution or winding-up
of the Company, whether voluntary or involuntary (a "LIQUIDATION"), the Holders
shall be entitled to receive out of the assets of the Company, whether such
assets are capital or surplus, for each share of Preferred Stock an amount equal
to the Stated Value plus all due but unpaid dividends per share before any
distribution or payment shall be made to the holders of any Junior Securities,
and if the assets of the Company shall be insufficient to pay in full such
amounts, then the entire assets to be distributed to the Holders shall be
distributed among the Holders ratably in accordance with the respective amounts
that would be payable on such shares if all amounts payable thereon were paid in
full. A sale, conveyance or disposition of all or substantially all of the
assets of the Company or the effectuation by the Company of a transaction or
series of related transactions in which more than 33% of the voting power of the
Company is disposed of, or a consolidation or merger of the Company with or into
any other company or companies into one or more companies not wholly- owned by
the Company shall not be treated as a Liquidation, but instead shall be subject
to the provisions of Section 5. The Company shall mail written notice of any
such Liquidation, not less than 45 days prior to the payment date stated
therein, to each record Holder.
Section 5. CONVERSION.
----------
(a)(i) CONVERSIONS AT OPTION OF HOLDER. Each share of Preferred Stock
shall be convertible into shares of Common Stock at the Conversion Ratio (as
defined in Section 9), at the option of the Holder, at any time and from time to
time from and after the earlier of (i) the date the
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Underlying Shares Registration Statement (as defined in Section 9) is first
declared effective by the Commission (as defined in Section 9) and (ii) the 90th
day following the Original Issue Date. Holders shall effect conversions by
surrendering the certificate or certificates representing the shares of
Preferred Stock duly endorsed in blank to be converted to the Company, together
with the form of conversion notice attached hereto as EXHIBIT A (a "HOLDER
CONVERSION NOTICE"). Each Holder Conversion Notice shall specify the number of
shares of Preferred Stock to be converted and the date on which such conversion
is to be effected, which date may not be prior to the date the Holder delivers
such Holder Conversion Notice by facsimile and no earlier than the date the
Company receives the certificate for the Preferred Stock duly endorsed in blank
(the "HOLDER CONVERSION DATE"). If no Holder Conversion Date is specified in a
Holder Conversion Notice, the Holder Conversion Date shall be the date that such
Holder Conversion Notice is deemed delivered hereunder. If the Holder is
converting less than all shares of Preferred Stock represented by the
certificate or certificates tendered by the Holder with the Holder Conversion
Notice, or if a conversion hereunder cannot be effected in full for any reason,
the Company shall promptly deliver to such Holder (in the manner and within the
time set forth in Section 5(b)) a certificate representing the number of shares
of Preferred Stock as have not been converted.
(ii) CONVERSIONS AT OPTION OF THE COMPANY. If at any time
after the Original Issue Date the average of the Per Share Market Values for the
20 consecutive Trading Days immediately preceding the date of the delivery by
the Company of a Company Conversion Notice (as defined below) shall equal or
exceed $7.50 (subject to equitable adjustment for stock splits, recombinations
and similar events pursuant to Section 5(c)(ii)), all or any portion of the
Preferred Stock shall be convertible into Common Stock (subject to the
limitations set forth in Section 5(a)(iv)) at the Conversion Ratio at the option
of the Company on the applicable Company Conversion Date (as defined below),
PROVIDED, that the Company shall not be permitted to deliver a Company
Conversion Notice (as defined below) at any time when the Underlying Securities
Registration Statement is not then effective or shares of Common Stock are not
actively traded on the Nasdaq National Market ("NASDAQ") or listed or quoted for
trading on the New York Stock Exchange, American Stock Exchange or Nasdaq
SmallCap Market (each, a "SUBSEQUENT MARKET"). The Company shall effect such
conversion by delivering to the Holder a written notice in the form attached
hereto as EXHIBIT B (the "COMPANY CONVERSION NOTICE"), which Company Conversion
Notice, once given, shall be irrevocable. Each Company Conversion Notice shall
specify the number of shares of Preferred Stock to be converted and the date on
which such conversion is to be effected, which date may not be prior to the date
the Company delivers such Company Conversion Notice by facsimile to the Holder
(the "COMPANY CONVERSION DATE"). If no conversion Date is specified in a Company
Conversion Notice, the Company Conversion Date shall be the date that the
Company Conversion Notice is deemed delivered hereunder. Upon its receipt of a
Company Conversion Notice, the Holder shall surrender the certificate
representing the shares of Preferred Stock duly endorsed in blank to the office
of the Company or of any transfer agent of the Common Stock. If the Company is
converting less than all shares of Preferred Stock represented by the
certificate or certificates surrendered by the Holder upon the Company's
Conversion Notice, the Company shall, upon conversion of the shares of Preferred
Stock subject to such Company Conversion Notice and receipt of the certificate
or certificates representing the shares of Preferred Stock duly endorsed in
blank surrendered for conversion, deliver to the Holder, (in the manner and
within the time period
-3-
set forth in Section 5(b)) a certificate representing the number of shares of
Preferred Stock as have not been converted. Each of a Holder Conversion Notice
and a Company Conversion Notice is sometimes referred to herein as a "CONVERSION
NOTICE," and each of a Holder Conversion Date and a Company Conversion Date is
sometimes referred to herein as a "CONVERSION DATE."
(iii) AUTOMATIC CONVERSION. Subject to the provisions of this
paragraph and Section 5(a)(iv), all outstanding shares of Preferred Stock for
which conversion notices have not previously been received or for which
redemption has not been made or required hereunder shall be automatically
converted on the third (3rd) anniversary of the Original Issue Date at the then
applicable Conversion Price. The conversion contemplated by this paragraph shall
not occur at such time as (a)(1) an Underlying Shares Registration Statement is
not then effective or (2) the Holder is not permitted to resell Underlying
Shares (as defined in Section 9) pursuant to Rule 144(k) promulgated under the
Securities Act (as defined in Section 9), without volume restrictions, as
evidenced by an opinion letter of counsel acceptable to the Holder and the
transfer agent for the Common Stock; or (b) there are not sufficient shares of
Common Stock authorized and reserved for issuance upon such conversion.
Notwithstanding the foregoing, the three-year period for conversion under this
Section shall be extended (on a day-for-day basis) for any Trading Days after
the Effectiveness Date (as defined in the Registration Rights Agreement) that a
Holder is unable to resell Underlying Shares under an Underlying Shares
Registration Statement due to: (a) the Common Stock not being listed or quoted
for trading on the NASDAQ or any Subsequent Market, (b) the failure of such
Underlying Shares Registration Statement to be declared effective, or if so
declared, to remain effective during the Effectiveness Period (as defined in the
Registration Rights Agreement) as to all Underlying Shares, or (c) the
suspension of the Holder's right to resell Underlying Shares thereunder. The
provisions of Sections 5(a)(iv)(A) and (B) shall not apply to any automatic
conversion pursuant to this Section 5(a)(iii).
(iv) CERTAIN CONVERSION RESTRICTIONS.
--------------------------------
(A) A Holder may not convert shares of Preferred Stock or
receive shares of Common Stock as payment of dividends hereunder to the extent
such conversion or receipt of such dividend payment would result in the Holder,
together with any affiliate thereof, beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act (as defined in Section 9) and
the rules promulgated thereunder) in excess of 4.999% of the then issued and
outstanding shares of Common Stock, including shares issuable upon conversion
of, and payment of dividends on, the shares of Preferred Stock held by such
Holder after application of this Section. Since the Holder will not be obligated
to report to the Company the number of shares of Common Stock it may hold at the
time of a conversion hereunder, unless the conversion at issue would result in
the issuance of shares of Common Stock in excess of 4.999% of the then
outstanding shares of Common Stock without regard to any other shares which may
be beneficially owned by the Holder or an affiliate thereof, the Holder shall
have the authority and obligation to determine whether the restriction contained
in this Section will limit any particular conversion hereunder and to the extent
that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of the shares of Preferred Stock are
convertible shall be the responsibility and obligation of the Holder. If the
Holder has delivered a Conversion Notice for shares of Preferred Stock that,
without regard to any
-4-
other shares that the Holder or its affiliates may beneficially own, would
result in the issuance in excess of the permitted amount hereunder, the Company
shall notify the Holder of this fact and shall honor the conversion for the
maximum number of shares of Preferred Stock permitted to be converted on such
Conversion Date in accordance with the periods described herein and, at the
option of the Holder, either retain shares of Preferred Stock tendered for
conversion in excess of the permitted amount hereunder for future conversions or
return such excess shares of Preferred Stock permitted to the Holder. The
provisions of this Section may be waived by a Holder (but only as to itself and
not to any other Holder) upon not less than 61 days prior written notice to the
Company. Other Holders shall be unaffected by any such waiver.
(B) A Holder may not convert shares of Preferred Stock or
receive shares of Common Stock as payment of dividends hereunder to the extent
such conversion or receipt of such dividend payment would result in the Holder,
together with any affiliate thereof, beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules promulgated
thereunder) in excess of 9.999% of the then issued and outstanding shares of
Common Stock, including shares issuable upon conversion of, and payment of
dividends on, the shares of Preferred Stock held by such Holder after
application of this Section. Since the Holder will not be obligated to report to
the Company the number of shares of Common Stock it may hold at the time of a
conversion hereunder, unless the conversion at issue would result in the
issuance of shares of Common Stock in excess of 9.999% of the then outstanding
shares of Common Stock without regard to any other shares which may be
beneficially owned by the Holder or an affiliate thereof, the Holder shall have
the authority and obligation to determine whether the restriction contained in
this Section will limit any particular conversion hereunder and to the extent
that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of the shares of Preferred Stock are
convertible shall be the responsibility and obligation of the Holder. If the
Holder has delivered a Conversion Notice for shares of Preferred Stock that,
without regard to any other shares that the Holder or its affiliates may
beneficially own, would result in the issuance in excess of the permitted amount
hereunder, the Company shall notify the Holder of this fact and shall honor the
conversion for the maximum number of shares of Preferred Stock permitted to be
converted on such Conversion Date in accordance with the periods described
herein and, at the option of the Holder, either retain shares of Preferred Stock
tendered for conversion in excess of the permitted amount hereunder for future
conversions or return such excess shares of Preferred Stock permitted to the
Holder. The provisions of this Section may be waived by a Holder (but only as to
itself and not to any other Holder) upon not less than 61 days prior written
notice to the Company. Other Holders shall be unaffected by any such waiver.
(b)(i) Not later than three (3) Trading Days after each Conversion
Date, the Company will deliver to the Holder (A) a certificate or certificates
which shall be free of restrictive legends and trading restrictions (other than
those required by Section 3.1(b) of the Purchase Agreement (as defined in
Section 9)) representing the number of shares of Common Stock being acquired
upon the conversion of shares of Preferred Stock, (B) one or more certificates
representing the number of shares of Preferred Stock not converted (if
applicable) and (C) a bank check in the amount of accrued and unpaid dividends
(if the Company has elected or is required to pay accrued dividends in cash).
Notwithstanding the foregoing or anything to the contrary contained herein, the
Company shall not
-5-
be obligated to issue certificates evidencing the shares of Common Stock
issuable upon conversion of any shares of Preferred Stock until one Trading Day
after certificates evidencing such shares of Preferred Stock, duly endorsed in
blank, are delivered for conversion to the Company, or the Holder of such
Preferred Stock notifies the Company that such certificates have been lost,
stolen or destroyed and provides a bond (or other adequate security) reasonably
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection therewith. The Company shall, upon request of the Holder, if
available, use its reasonable efforts to deliver any certificate or certificates
required to be delivered by the Company under this Section electronically
through the Depository Trust Corporation or another established clearing
corporation performing similar functions. If in the case of any Conversion
Notice such certificate or certificates are not delivered to or as directed by
the applicable Holder by the fifth (5th) Trading Day after the Conversion Date,
the Holder shall be entitled to elect by written notice to the Company at any
time on or before its receipt of such certificate or certificates thereafter, to
rescind such conversion, in which event the Company shall immediately return the
certificates representing the shares of Preferred Stock tendered for conversion.
(ii) In addition to any other rights available to the Holder,
if the Company fails to deliver to the Holder such certificate or certificates
pursuant to Section 5(b)(i), by the fifth (5th) Trading Day after the Conversion
Date, and if after such fifth (5th) Trading Day the Holder purchases (in an open
market transaction or otherwise) Common Stock to deliver in satisfaction of a
sale by such Holder of the Underlying Shares which the Holder was entitled to
receive upon such conversion (a "BUY-IN"), then the Company shall (A) pay in
cash to the Holder the amount by which (x) the Holder's total purchase price
(including brokerage commissions, if any) for the Common Stock so purchased
exceeds (y) the product of (1) the aggregate number of shares of Common Stock
that such Holder was entitled to receive from the conversion at issue multiplied
by (2) the market price of the Common Stock at the time of the sale giving rise
to such purchase obligation and (B) at the option of the Holder, either return
the shares of Preferred Stock for which such conversion was not honored or
deliver to such Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its conversion and delivery
obligations under Section 5(b)(i). For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted conversion of shares of Preferred Stock with respect to which the
market price of the Underlying Shares at the time of the sale giving rise to
such purchase obligation totaled $10,000, under clause (A) of the immediately
preceding sentence the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In. Nothing herein shall limit a Holder's
right to pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company's failure to timely deliver
certificates representing shares of Common Stock upon conversion of the shares
of Preferred Stock as required pursuant to the terms hereof.
(c)(i) The conversion price for each share of Preferred Stock in effect
on any Conversion Date shall be $4.50 (the "CONVERSION PRICE"). The Conversion
Price is subject to adjustment from time to time as set forth below.
-6-
(ii) If the Company, at any time while any shares of Preferred
Stock are outstanding, shall (a) pay a stock dividend (except scheduled
dividends paid on preferred stock which contain a stated dividend rate) or
otherwise make a distribution or distributions on shares of its Common Stock or
on any other class of capital stock payable in shares of Common Stock, (b)
subdivide outstanding shares of Common Stock into a larger number of shares, or
(c) combine outstanding shares of Common Stock into a smaller number of shares,
then the Conversion Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding before such event and of which the denominator shall
be the number of shares of Common Stock (excluding treasury shares, if any)
outstanding after such event. Any adjustment made pursuant to this Section
5(c)(ii) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision or combination and shall apply to successive subdivisions and
combinations.
(iii) Except in the case of the Company issuing rights to
subscribe for shares of Common Stock distributed to all the holders of the
Common Stock and the exercise of such rights (such as the rights under the
Company's stockholders rights plan) or the grant or exercise of any stock,
warrant, stock appreciation rights or options which may hereafter be granted or
exercised under any employee benefit plan of the Company now existing or to be
implemented in the future, if the Company or any subsidiary thereof, as
applicable with respect to Common Stock Equivalents (as defined below), at any
time while any shares of Preferred Stock are outstanding, shall issue either (i)
shares of Common Stock at a price per share (the "Issuance Price") less than the
Conversion Price or (ii) rights, warrants, options or other securities or debt
that is convertible into or exchangeable for shares of Common Stock ("COMMON
STOCK EQUIVALENTS"), entitling any Person to acquire shares of Common Stock at
an Issuance Price less than the Conversion Price (if the holder of the Common
Stock Equivalent so issued shall at any time, whether by operation of purchase
price adjustments, reset provisions, floating conversion, exercise or exchange
prices or otherwise be entitled to receive shares of Common Stock at a
conversion or exercise price less than the Conversion Price, such issuance shall
be deemed to have occurred for less than the Conversion Price), then the
Conversion Price shall be reduced to the Issuance Price. Such adjustment shall
be made whenever Common Stock or Common Stock Equivalents are issued at a price
below the Conversion Price. However, upon the expiration of any Common Stock
Equivalents the issuance of which resulted in an adjustment in the Conversion
Price pursuant to this Section, if any such Common Stock Equivalents shall
expire and shall not have been exercised, the Conversion Price shall immediately
upon such expiration be recomputed and effective immediately upon such
expiration be increased to the price which it would have been (but reflecting
any other adjustments in the Conversion Price made pursuant to the provisions of
this Section after the issuance of such Common Stock Equivalents) had the
adjustment of the Conversion Price made upon the issuance of such Common Stock
Equivalents been made on the basis of offering for subscription or purchase only
that number of shares of the Common Stock actually purchased upon the exercise
of such Common Stock Equivalents actually exercised.
(iv) If the Company, at any time while shares of Preferred
Stock are outstanding, shall distribute to all holders of Common Stock (and not
to Holders) evidences of its
-7-
indebtedness or assets or rights or warrants to subscribe for or purchase any
security (excluding those referred to in Sections 5(c)(ii)-(iii) and (vii)),
then in each such case the Conversion Price at which each share of Preferred
Stock shall thereafter be convertible shall be determined by multiplying the
Conversion Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Conversion Price determined as of
the record date mentioned above, and of which the numerator shall be such
Conversion Price on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Company's independent certified public accountants that regularly examines
the financial statements of the Company.
(v) All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(vi) Whenever the Conversion Price is adjusted hereunder, the
Company shall promptly mail to each Holder, a notice setting forth the
Conversion Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment.
(vii) In case of any reclassification of the Common Stock or
any compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, then the Holder shall have the right
thereafter to convert the shares of Preferred Stock only into the shares of
stock and other securities and property receivable upon or deemed to be held by
holders of Common Stock following such reclassification or share exchange, and
the Holder shall be entitled upon such event to receive such amount of
securities or property equal to the amount of shares of Common Stock such Holder
would have been entitled to had such Holder converted such shares of Preferred
Stock immediately prior to such reclassification or share exchange. The terms of
any such reclassification or share exchange shall include such terms so as to
continue to give to the Holder the right to receive the securities or property
set forth in this Section upon any conversion following any such
reclassification or share exchange.
(viii) In case of any (1) merger or consolidation of the
Company with or into another Person, or (2) sale by the Company of substantially
all of the assets of the Company (on a book value basis) in one or a series of
related transactions, the Holder shall have the right thereafter to convert its
shares of Preferred Stock into the shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of Common Stock
following such merger, consolidation or sale, and such Holder shall be entitled
upon such event or series of related events to receive such amount of
securities, cash and property as the shares of Common Stock into which such
shares of Preferred Stock could have been converted immediately prior to such
merger, consolidation or sales would have been entitled. The terms of any such
merger, sale or consolidation shall include such terms so as to give the Holder
the right to receive the securities, cash and property set forth in this Section
upon any conversion or redemption following such event. This provision shall
similarly apply to successive such events.
-8-
(ix) If (a) the Company shall declare a dividend (or any other
distribution) on its Common Stock, (b) the Company shall declare a special
nonrecurring cash dividend on or a redemption of its Common Stock, (c) the
Company shall authorize the granting to all holders of Common Stock rights or
warrants to subscribe for or purchase any shares of capital stock of any class
or of any rights, (d) the approval of any stockholders of the Company shall be
required in connection with any reclassification of the Common Stock, any
consolidation or merger to which the Company is a party, any sale or transfer of
all or substantially all of the assets of the Company, of any compulsory share
of exchange whereby the Common Stock is converted into other securities, cash or
property, or (e) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Company; then the
Company shall cause to be mailed to the Holders at their last addresses as they
shall appear upon the stock books of the Company, at least 10 calendar days
prior to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer, share exchange, dissolution, liquidation or winding up;
PROVIDED, HOWEVER, that the failure to mail such notice or any defect therein or
in the mailing thereof shall not affect the validity of the corporate action
required to be specified in such notice. Holders are entitled to convert shares
of Preferred Stock during the 10-day period commencing the date of such notice
to the effective date of the event triggering such notice.
(d) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of Common Stock solely for
the purpose of issuance upon conversion of Preferred Stock and payment of
dividends on Preferred Stock, each as herein provided, free from preemptive
rights or any other actual contingent purchase rights of persons other than the
Holders, not less than such number of shares of Common Stock as shall be
issuable (taking into account the provisions of Section 5(a) and Section 5(c))
upon the conversion of all outstanding shares of Preferred Stock. The Company
covenants that all shares of Common Stock that shall be so issuable shall, upon
issue, be duly and validly authorized, issued and fully paid, nonassessable.
(e) Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of Common Stock, but
shall round the number of shares of Common Stock to be issued to the closest
number of whole shares of Common Stock.
(f) The issuance of certificates for Common Stock on conversion of
Preferred Stock shall be made without charge to the Holders thereof for any
documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such certificate, provided that the Company shall not be required
to pay any tax that may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate upon conversion in a name other
than that of the Holder of such shares of Preferred Stock so converted.
-9-
(g) Shares of Preferred Stock converted into Common Stock or redeemed
in accordance with the terms hereof shall be canceled and may not be reissued.
(h) Any and all notices or other communications or deliveries to be
provided by the Holders of the Preferred Stock hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by facsimile or sent by a nationally recognized overnight courier service,
addressed to the attention of the Chief Financial Officer of the Company
addressed to 0000 Xxxxxxxxx Xxxx., Xxxxx 000-X, Xxxxx Xxxxx, Xxxxxxxxx, XX 00000
or to facsimile number 000-000-0000, or to such other address or facsimile
number as shall be specified in writing by the Company for such purpose. Any and
all notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile or sent by
a nationally recognized overnight courier service, addressed to each Holder at
the facsimile telephone number or address of such Holder appearing on the books
of the Company, or if no such facsimile telephone number or address appears, at
the facsimile number or address of the Holder set forth in the Purchase
Agreement. 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 6:30 p.m. (New York City
time)(with confirmation of transmission), (ii) the date after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section later than 6:30 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date (with confirmation of transmission), (iii) upon receipt, if sent by a
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given.
-10-
Section 6. OPTIONAL REDEMPTION.
-------------------
(a) Subject to the provisions of this Section 6, from and after the
ninth month anniversary of the Original Issue Date (the "TRIGGER DATE"), the
Company shall have the right, upon 45 calendar days' notice (an "OPTIONAL
REDEMPTION NOTICE") to the Holders, to redeem all or any portion of the shares
of Preferred Stock which have not previously been redeemed or for which
Conversion Notices shall not have been delivered, at a price equal to the
Redemption Price (as defined in Section 9), PROVIDED, that the Trigger Date
shall be extended by the number of days during which any Blocking Notices (as
defined in the Registration Rights Agreement) shall be in effect. The Company
may only deliver an Optional Redemption Notice if: (i) the number of shares of
Common Stock at the time authorized, unissued and unreserved for all purposes is
sufficient to satisfy the Company's conversion obligations of all shares of
Preferred Stock then outstanding, (ii) the Underlying Shares then outstanding
are registered for resale pursuant to an effective Underlying Shares
Registration Statement pursuant to which the Holders are permitted to sell
Underlying Shares or the Underlying Shares may be resold without volume
restrictions pursuant to Rule 144(k) promulgated under the Securities Act, and
(iii) the Common Stock is listed for trading on the NASDAQ or on a Subsequent
Market. Each of clauses (i) - (iii) of the immediately preceding sentence must
be true during the entire 45 calendar days between the date of delivery of an
Optional Redemption Notice and the date of payment of the Redemption Price. The
entire Redemption Price shall be paid in cash. A Holder may, subject to Section
5(a)(i) hereof, convert (and the Company shall honor such conversions in
accordance with the terms hereof) any or all of the shares of Preferred Stock
subject to an Optional Redemption Notice, provided that the Conversion Notice
for such shares is delivered prior to the 43rd calendar day following the
receipt by such Holder of such an Optional Redemption Notice.
(b) Failure by the Company to pay any portion of the Redemption Price
by the tenth Trading Day following the date of an Optional Redemption Notice
shall result in the invalidation AB INITIO of the unpaid portion of such
optional redemption, and, notwithstanding anything herein to the contrary, the
Company shall thereafter have no further rights to optionally redeem any shares
of Preferred Stock. In such event, the Company shall, at the option of the
Holder, either, (i) not later than three Trading Days from receipt of Holder's
request for such election, return to the Holder all of the shares of Preferred
Stock for which such Redemption Price has not been paid in full (the "UNPAID
REDEMPTION SHARES") or (ii) convert of or any portion of the Unpaid Redemption
Shares. If the Holder elects option (ii) above, the Company shall within three
Trading Days of its receipt of such election deliver to the Holder the shares of
Common Stock issuable upon conversion of the Unpaid Redemption Shares subject to
such Holder's conversion demand and otherwise perform its obligations hereunder
with respect thereto.
Section 7. REDEMPTION UPON TRIGGERING EVENTS.
---------------------------------
(a) Upon the occurrence of a Triggering Event, each Holder shall (in
addition to all other rights it may have hereunder or under applicable law),
have the right, exercisable at the sole option of such Holder, to require the
Company to redeem all or a portion of the Preferred Stock then held by such
Holder for a redemption price, in cash, equal to the sum of (i) the Mandatory
-11-
Redemption Amount (as defined in Section 9) plus (ii) the product of (A) the
number of Underlying Shares issued in respect of conversions hereunder and then
held by the Holder (the "REMAINING SHARES") and (B) the Per Share Market Value
on the date such redemption is demanded or the date the redemption price
hereunder is paid in full, whichever is greater (such sum, the "REDEMPTION
AMOUNT"). The Redemption Amount shall be due and payable within five (5) Trading
Days of the date on which the notice for the payment therefor is provided by a
Holder. If the Company fails to pay the Redemption Amount hereunder in full
pursuant to this Section on the date such amount is due in accordance with this
Section, the Company will pay interest thereon at a rate of 18% per annum (or
the lesser amount permitted by applicable law), accruing daily from such date
until the Redemption Amount, plus all such interest thereon, is paid in full.
For purposes of this Section, a share of Preferred Stock is outstanding until
such date as the Holder shall have received Underlying Shares upon a conversion
(or attempted conversion) thereof that meets the requirements hereof. Upon
receipt of the Redemption Amount, the Holder shall return the Remaining Shares
to the Company.
A "Triggering Event" means any one or more of the following events
(whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental
body):
(i) the Company or any of its Material Subsidiaries (as
defined in Section 9) shall commence, or there shall be commenced against the
Company or any such Material Subsidiary a case under any applicable bankruptcy
or insolvency laws as now or hereafter in effect or any successor thereto which
remains undismissed for a period of 60 days, or the Company commences any other
proceeding under any reorganization, arrangement, adjustment of debt, 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
Material Subsidiary thereof or there is commenced against the Company or any
Material Subsidiary thereof any such bankruptcy, insolvency or other proceeding
which remains undismissed for a period of 60 days; or the Company or any
Material Subsidiary thereof is adjudicated insolvent or bankrupt; or any order
of relief or other similar order adjudicating the Company or any Material
Subsidiary insolvent in any such case or proceeding is entered; or the Company
or any Material 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 60 days; or the Company or any Material
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
Material Subsidiary thereof shall call a meeting of its creditors with a view to
arranging a composition, adjustment or restructuring of its debts; or the
Company or any Material Subsidiary thereof shall by any act or failure to act
expressly 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
Material Subsidiary thereof for the purpose of effecting any of the foregoing;
(ii) the Company shall fail to pay the Redemption Price within
60 days of the date due; or
-12-
(iii) the Company shall default in any of its obligations
under any currently existing credit agreement or facility or other instrument
evidencing any indebtedness for borrowed money, which agreement, facility or
instrument evidences a principal amount of $1,000,000 or more, where such
default continues after the Company's opportunities to cure such default
pursuant to the terms of such agreement, facility or instrument have expired and
such default has not been waived by the party to such agreement, facility or
instrument, unless the Holder provides a waiver of enforcement of this
provision, on a case by case basis, after notice of such condition is provided
to the Holder by the Company.
Section 8. PUT OPTION.
----------
(a) For a 90-day period following the 13th month anniversary of the
Original Issue Date, the Holder shall have the right (the "PUT RIGHT") to
request that the Company redeem all or a portion of the outstanding shares of
Preferred Stock at a price equal to the Redemption Price, by delivering to the
Company a written notice (a "PUT NOTICE") specifying the number of shares of
Preferred Stock subject to the Put Right, PROVIDED, that such 90-day period
shall be extended by the number of days during which any Blocking Notice shall
be in effect. On or prior to the fifth Trading Day following the date of the
delivery of the Put Notice (such fifth Trading Day, the "PUT EXERCISE DATE"):
(i) the Holder shall deliver to the Company the shares of Preferred Stock
subject to the Put Option, properly endorsed, and (ii) upon receipt of the
shares of Preferred Stock subject to the Put Option, the Company shall deliver
to the Holder, in immediately available funds, the Redemption Price. The
Redemption Price shall be paid in cash and shall be free of any claim of
subordination. If any portion of the Redemption Price shall not be paid on or
prior to the Put Exercise Date, then the Redemption Price shall be increased by
18% per annum (or such lesser maximum amount that is permitted to be paid by
applicable law) to accrue daily from the date such payment is due hereunder
through and including the date of payment (which amount shall be paid as
liquidated damages and not as a penalty), payable in cash, and the Holder shall
have the right to convert the shares of Preferred Stock subject to the Put Right
pursuant to Section 5(c)(i) hereof.
Section 9. DEFINITIONS. For the purposes hereof, the following terms
shall have the following meanings:
"CHANGE OF CONTROL TRANSACTION" means the occurrence of any of (i) an
acquisition after the date hereof by an individual or legal entity or "group"
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 33% of the
voting securities of the Company, (ii) a replacement at one time or over two
years of more than one- half of the members of the Company's board of directors
which is not approved by a majority of those individuals who are members of the
board of directors on the date hereof (or by those individuals who are serving
as members of the board of directors on any date whose nomination to the board
of directors was approved by a majority of the members of the board of directors
who are members on the date hereof), (iii) the merger of the Company with or
into another entity that is not wholly-owned by the Company, consolidation or
sale of all or substantially all of the assets of the
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Company in one or a series of related transactions, or (iv) the execution by the
Company of an agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (i), (ii) or (iii).
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Company's common stock, par value $.01 per
share, and stock of any other class into which Common Stock may hereafter have
been reclassified or changed.
"CONVERSION RATIO" means, at any time, a fraction, the numerator of
which is Stated Value and the denominator of which is the Conversion Price at
such time.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"JUNIOR SECURITIES" means the Common Stock and all other equity
securities of the Company other than those securities that are outstanding on
the Original Issue Date and which are explicitly senior or pari passu in
dividend rights or liquidation preference to the Preferred Stock.
"MANDATORY REDEMPTION AMOUNT" for each share of Preferred Stock means
the sum of (i) the greater of (A) 120% of the Stated Value and (B) the product
of (a) the Per Share Market Value on the Trading Day immediately preceding (x)
the date of the Triggering Event or the Conversion Date, as the case may be, or
(y) the date of payment in full by the Company of the applicable redemption
price, whichever is greater, and (b) the Conversion Ratio calculated on the date
of the Triggering Event, or the Conversion Date, as the case may be, and (ii)
all other amounts, costs, expenses and liquidated damages due in respect of such
share of Preferred Stock.
"MATERIAL SUBSIDIARY" shall mean any subsidiary of the Company the loss
of which is reasonably likely to lead to the Company's insolvency or violation
under Section 7(a)(i) (as applicable to the Company).
"ORIGINAL ISSUE DATE" shall mean the date of the first issuance of any
shares of the Preferred Stock regardless of the number of transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.
"PER SHARE MARKET VALUE" means on any particular date (a) the closing
sales price per share of Common Stock on such date on the NASDAQ or on the
Subsequent Market on which the Common Stock is then listed or quoted, or if
there is no such price on such date, then the closing sales price on the NASDAQ
or on such Subsequent Market on the date nearest preceding such date, or (b) if
the Common Stock is not then listed or quoted on the NASDAQ or on a Subsequent
Market, the closing sales 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
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succeeding to its functions of reporting prices), then the average of the "Pink
Sheet" quotes for the twenty consecutive Trading Days, as determined in good
faith by the Holder, 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 shares of the
Preferred Stock.
"PERSON" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"PURCHASE AGREEMENT" means the Convertible Preferred Stock Purchase
Agreement, dated as of March 30, 2000, to which the Company and the original
Holder are parties, as amended, modified or supplemented from time to time in
accordance with its terms.
"REDEMPTION PRICE" shall be sum of (i) $10,500 per share of Preferred
Stock to be redeemed and (ii) all other amounts, costs, expenses and liquidated
damages due in respect of such share of Preferred Stock.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of March 30, 2000, to which the Company and the original
Holder are parties, as amended, modified or supplemented from time to time in
accordance with its terms.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"TRADING DAY" means (a) a day on which the Common Stock is traded on
the NASDAQ or on the Subsequent Market on which the Common Stock is then listed
or quoted, as the case may be, or (b) if the Common Stock is not listed on the
NASDAQ or on a Subsequent Market, a day on which the Common Stock is traded in
the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if
the Common Stock is not quoted on the OTC Bulletin Board, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); PROVIDED, HOWEVER, that in the
event that the Common Stock is not listed or quoted as set forth in (a), (b) and
(c) hereof, then Trading Day shall mean any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.
"TRANSACTION DOCUMENTS" shall have the meaning set forth in the
Purchase Agreement.
"UNDERLYING SHARES" means, collectively, the shares of Common Stock
into which the shares of Preferred Stock are convertible in accordance with the
terms hereof.
"UNDERLYING SHARES REGISTRATION STATEMENT" means a registration
statement that meets the requirements of the Registration Rights Agreement and
registers the resale of all Underlying Shares by the Holder, who shall be named
as a "selling stockholder" thereunder.
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EXHIBIT A
NOTICE OF CONVERSION AT OPTION OF THE HOLDER
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
The undersigned hereby elects to convert the number of shares of Series C
Convertible Preferred Stock indicated below, into shares of Common Stock, par
value $.01 per share (the "COMMON STOCK"), of Commodore Holdings Limited, a
Bermuda exempt company (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 and a registration statement covering the resale of the
Common Stock into which the Preferred Stock may be converted is not then
effective (or effective, but not current and accurate in certain material
respects), then the undersigned shall comply with Section 3.1 of the Purchase
Agreement and pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith. No fee will be charged to the Holder for
any conversion, except for such transfer taxes, if any.
Conversion calculations:
-------------------------------------------------------------
Date to Effect Conversion
-------------------------------------------------------------
Number of shares of Preferred Stock to be Converted
-------------------------------------------------------------
Stated Value of shares of Preferred Stock to be Converted
-------------------------------------------------------------
Number of shares of Common Stock to be Issued
-------------------------------------------------------------
Applicable Conversion Price
-------------------------------------------------------------
Signature
-------------------------------------------------------------
Name
-------------------------------------------------------------
Address
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EXHIBIT B
NOTICE OF CONVERSION AT OPTION OF THE COMPANY
(To be Executed by the Company
in order to Convert shares of Preferred Stock)
The undersigned in the name and on behalf of Commodore Holdings Limited, a
Bermuda exempt company (the "COMPANY"), hereby notifies the addressee hereof of
its election to exercise its right to convert the number of shares of Series C
Convertible Preferred Stock indicated below, into shares of Common Stock, par
value $.01 per share (the "COMMON STOCK"), of the Company, according to the
conditions hereof, as of the date written below. No fee will be charged to the
Holder for any conversion, except for such transfer taxes, if any, which may be
incurred by the Company if shares are to be issued in the name of a person other
than in the name of the addressee.
Conversion calculations:
-------------------------------------------------------------
Date to Effect Conversion
-------------------------------------------------------------
Number of shares of Preferred Stock to be Converted
-------------------------------------------------------------
Stated Value of shares of Preferred Stock to be Converted
-------------------------------------------------------------
Number of shares of Common Stock to be Issued
-------------------------------------------------------------
Applicable Conversion Price
-------------------------------------------------------------
Signature
-------------------------------------------------------------
Name
-------------------------------------------------------------
Address
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