PREFERRED STOCK INVESTMENT AGREEMENT
AGREEMENT dated as of February 25, 1998, between Ramtron International
Corporation (the "Company") and the investor whose name is set forth at the
foot of this Agreement (the "Investor").
The parties hereto agree as follows:
ARTICLE I
Purchase and Sale of Preferred Stock
Section 1.1 Purchase and Sale of Preferred Stock. Upon the following terms
and conditions, the Company shall issue and sell to the Investor shares of the
Company's Floating Reset Convertible Preferred Stock (the "Shares") having
the rights, designations and preferences set forth in Schedule I hereto, and
the Investor shall purchase from the Company the number of Shares designated
on the signature page hereof.
Section 1.2 Purchase Price. The purchase price for the Shares (the
"Purchase Price") shall be $1,000 per share.
Section 1.3 The Closing.
(a) The closing of the purchase and sale of the Shares (the "Closing"),
shall take place at the offices of the Company, at 10:00 a.m., local time on
the later of the following: (i) the date on which the last to be fulfilled or
waived of the conditions set forth in Article IV hereof and applicable to the
Closing shall be fulfilled or waived in accordance herewith, or (ii) such
other time and place and/or on such other date as the Investor and the Company
may agree. The date on which the Closing occurs is referred to herein as the
"Closing Date."
(b) On the Closing Date, the Company shall issue and countersign, or
cause to be issued and countersigned by its transfer agent, for delivery upon
the order of the Investor certificates representing the number of Shares being
purchased by the Investor, registered in the name of the Investor, or deposit
such Shares into accounts designated by the Investor, and the Investor shall
deliver to the Company the Purchase Price for such Shares by cashier's check
or wire transfer in immediately available funds to such account as shall be
designated in writing by the Company. In addition, each party shall deliver
all documents, instruments and writings required to be delivered by such party
pursuant to this Agreement at or prior to the Closing.
Section 1.4 Covenant to Register.
(a) For purposes of this Section, the following definitions shall apply:
(i) The terms "register," "registered," and "registration"
refer to a registration under the Securities Act of 1933, as amended (the
"Act"), effected by preparing and filing a registration statement in
compliance with the Act, and the declaration or ordering of effectiveness of
such registration statement or amendment thereto.
(ii) The term "Registrable Securities" means (A) the shares of
common stock issued or issuable upon conversion of the Shares, or (B) any
securities of the Company or securities of any successor corporation issued
pursuant to the provisions of Schedule I hereto or issuable upon the
conversion or exercise of any warrant, right or other security that is issued
as a dividend or other distribution with respect to, or in exchange for or in
replacement of the Shares, which in either case (i) have not been resold
pursuant to an effective registration statement or pursuant to Rule 144 under
the Act or (ii) may not be resold pursuant to Rule 144(k) under the Act. For
purposes of this Agreement, securities will be considered ineligible for
resale pursuant to Rule 144(k) under the Act unless the Company's transfer
agent has accepted an instruction from the Company specifying that such
securities are eligible for sale pursuant to Rule 144(k).
(iii) The term "holder of Registrable Securities" includes any
person who holds Shares which are convertible into Registrable Securities.
(b) (i) The Company shall, as expeditiously as possible following the
Closing, file a registration statement on Form S-3, or if Form S-3 is not then
available, another appropriate form, covering the resale of all the
Registrable Securities under Rule 415 and, to the extent applicable, Rule 416.
The number of shares of Common Stock initially included in such registration
statement shall be not less than the number which would be issuable upon
conversion of the Shares including Shares subject to the Placement Agents'
warrants if all thereof were to be converted at a conversion price equal to
one-half of the market price of the Common Stock on the date the registration
statement is filed. The Company shall use its best efforts to cause such
registration statement to become effective by the 120th calendar day after the
Closing Date (the "Initial Registration"). In the event such registration
is not so declared effective or if at any time thereafter it does not include
at least 120% of the number of Registrable Securities which would then be
issuable upon conversion of the Shares (or any successor security) at the
conversion price then in effect, any holder of Registrable Securities shall
have the right to require by notice in writing that the Company register all
or any part of the Registrable Securities held by such holder (a "Demand
Registration") and the Company shall thereupon effect such registration in
accordance herewith (which may include adding such shares to an existing shelf
registration). The parties agree that if the holder of Registrable Securities
demands registration of less than all of the Registrable Securities, the
Company, at its option, may nevertheless file a registration statement
covering all of the Registrable Securities. If such registration statement is
declared effective with respect to all Registrable Securities, then so long as
the Company is in compliance with its obligations under Subsection (d)(i)
through (v) hereof, the demand registration rights granted pursuant to this
Subsection (b)(i) shall not be applicable. The Company shall provide holders
of Registrable Securities reasonable opportunity to review any such
registration statement or amendment or supplement thereto prior to the filing
thereof. If the Registrable Securities are registered initially on a form
other than Form S-3, the Company shall register the Registrable Securities on
Form S-3 as soon as use of such form is permissible.
(ii) The Company shall not be obligated to effect Demand
Registration under Subsection (b)(i) if all of the Registrable Securities held
by the holder of Registrable Securities which are demanded to be covered by
the Demand Registration are, at the time of such demand, included in an
effective registration statement and the Company is in compliance with its
obligations under Subsection (d)(i) through (v) hereof.
(iii) The Company may suspend the effectiveness of any such
registration effected pursuant to this Subsection (b) in the event, and for
such period of time as, such a suspension is required by the rules and
regulations of the Securities and Exchange Commission ("SEC"), and may
suspend use of the prospectus included in the Registration Statement if such
prospectus ceases to meet the requirements of Section 10 of the Act. The
Company will immediately advise the holders of the registered securities of
any such suspension, and will use its best efforts to cause such suspension to
terminate at the earliest possible date. The Investor agrees that following
receipt of any such notice, and until such suspension is terminated, the
Investor will not make use of the suspended prospectus and will make no sales
requiring delivery of such prospectus.
(iv) If the registration statement covering all Registrable
Securities is not effective by the 120th calendar day after the Closing Date,
the Company shall pay the Investor in cash an amount equal to 3% of the total
Purchase Price of the Shares purchased by the Investor for each 30 day period
thereafter until such registration statement is effective (pro-rata as to a
period of less than 30 days). An amount equal to 0.1% of the total Purchase
Price of Shares and any Registrable Securities then held by Investor shall
also be paid to the Investor in cash with respect to each day in excess of 30
days in any calendar year that the effectiveness of the Registration Statement
or use of the prospectus is suspended as set forth in Section 1.4 (b)(iii) or
the prospectus is otherwise unavailable for use by sellers of Registrable
Securities. Any payment hereunder shall be made not later than five business
days after the end of the period with respect to which such payment is due.
The "Purchase Price" of Registrable Securities shall be, in the case of
Registrable Securities derived from conversion or substitution of Shares, the
Purchase Price of such Shares. This subsection is in addition to the
provisions of Section 7.2(a) hereof.
(c) If the Company proposes to register (including for this purpose a
registration effected by the Company for shareholders other than the Investor)
any of its stock or other securities under the Act in connection with a public
offering of such securities (other than a registration on Form X-0, Xxxx X-0
or other limited purpose form) and all Registrable Securities have not
theretofore been included in a registration statement under Subsection (b)
which remains effective, the Company shall, at such time, promptly give all
holders of Registrable Securities written notice of such registration. Upon
the written request of any holder of Registrable Securities given within
twenty (20) days after receipt of such notice by the holder of Registrable
Securities, the Company shall use its best efforts to cause to be registered
under the Act all Registrable Securities that such holder of Registrable
Securities requests to be registered. However, the Company shall have no
obligation under this Subsection (c) to the extent that, with respect to
registration of a public offering for the account of the Company, the managing
underwriter of such public offering reasonably notifies such holder(s) in
writing of its determination that the Registrable Securities or a portion
thereof should be excluded therefrom. The rights of the Investor and the
obligations of the Company under this subsection are subject to any prior
registration rights of other shareholders of the Company which are disclosed
in Exhibit A hereto.
(d) Whenever required under this Section to effect the registration of
any Registrable Securities, including, without limitation, the Initial
Registration, the Company shall, as expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration to become effective as provided in Section 1.4(b)(i), and keep
such registration statement effective for so long as any holder of Registrable
Securities desires to dispose of the securities covered by such registration
statement, or, if earlier, until such Registrable Securities may be sold under
Rule 144(k) (provided that the Company's transfer agent has accepted an
instruction from the Company to such effect).
(ii) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of
the Act with respect to the disposition of all securities covered by such
registration statement and notify the holders of the filing and effectiveness
of such Registration Statement and any amendments or supplements.
(iii) Furnish to each holder of Registrable Securities such numbers
of copies of a current prospectus conforming with the requirements of the Act,
copies of the registration statement, any amendment or supplement thereto and
any documents incorporated by reference therein and such other documents as
such holder of Registrable Securities may reasonably require in order to
facilitate the disposition of Registrable Securities owned by such holder of
Registrable Securities.
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under such securities or "Blue Sky"
laws of such jurisdiction as shall be reasonably requested by a holder of
Registrable Securities and keep such registration or qualification effective
as long as required to permit sale of Registrable Securities thereunder,
provided that the Company shall not be required in connection therewith or as
a condition thereto to qualify to do business or to file general consent to
service of process in any such states or jurisdictions.
(v) Notify each holder of Registrable Securities immediately of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of
material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing, and use its best efforts to promptly update
and/or correct such prospectus.
(vi) Furnish to each holder of Registrable Securities included
therein (1) an opinion of counsel to the Company covering compliance of the
registration statement, as to form, with the requirements of the Act and the
rules thereunder, and covering the matters covered in the opinion filed as an
exhibit to the registration statement, and (2) a "cold comfort" letter or
letters of the Company's independent public accountants in the form and of the
substance customarily supplied to underwriters in connection with a public
offering.
(vii) Use its best efforts to list the Registrable Securities
covered by such registration statement with any national market or securities
exchange on which the Common Stock is then listed.
(viii) Make available for inspection by the holder of Registrable
Securities, upon request, all SEC Documents (as defined below) filed
subsequent to the Closing and require the Company's representatives to supply
all information reasonably requested by any holder of Registrable Securities
in connection with such registration statement.
(e) Each holder of Registrable Securities will furnish to the Company in
connection with any registration under this Section such information regarding
itself, the Registrable Securities and other securities of the Company held by
it, and the intended method of disposition of such securities as shall be
reasonably required to effect the registration of the Registrable Securities
held by such holder of Registrable Securities. The Investor shall provide
such data as of closing. The intended method of disposition (Plan of
Distribution) of such securities as so provided by Investor shall be included
without alteration in the Registration Statement covering the Registrable
Securities and shall not be changed without written consent of the Investor.
(f) (i) The Company shall indemnify, defend and hold harmless each
holder of Registrable Securities which are included in a registration
statement pursuant to the provisions of Subsections (b) or (c) (each, a
"Selling Shareholder") and each of its officers, directors, employees,
agents, partners or controlling persons (within the meaning of the Act) (each,
an "indemnified party") from and against, and shall reimburse such
indemnified party with respect to, any and all claims, suits, demands, causes
of action, losses, damages, liabilities, costs or expenses ("Liabilities")
to which such indemnified party may become subject under the Act or otherwise,
arising from or relating to (A) any untrue statement or alleged untrue
statement of any material fact contained in such registration statement, any
prospectus contained therein or any amendment or supplement thereto, or (B)
the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however, that
the Company shall not be liable in any such case to the extent that any such
Liability arises out of or is based upon an untrue statement or omission so
made in strict conformity with information furnished by such indemnified party
in writing specifically for use in the registration statement; provided
further, that the Company shall not be liable in any such case to the extent
that any such Liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any
preliminary prospectus if (i) a Selling Shareholder under an obligation to
send or deliver a copy of the prospectus with or prior to the delivery of
written confirmation of the sale of Registrable Securities to the person
asserting such Liability who purchased such Registrable Securities which are
the subject thereof from such Selling Shareholder failed to do so and (ii) the
prospectus would have corrected such untrue statement or omission; and
provided further, that the Company shall not be liable in any such case to the
extent that any Liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission in the prospectus,
if such untrue statement or alleged untrue statement, omission or alleged
omission is corrected in an amendment or supplement to the prospectus and if,
having previously been furnished by or on behalf of the Company with copies of
the prospectuses so amended or supplemented and having been obligated to
deliver such prospectuses, the Selling Shareholder thereafter failed to
deliver such prospectus as so amended or supplemented, prior to or
concurrently with the sale of Registrable Securities to the person asserting
such Liability who purchased such Registrable Securities which are the subject
thereof from such Selling Shareholder.
(ii) In the event of any registration under the Act of Registrable
Securities pursuant to Subsections (b) or (c), each holder of such Registrable
Securities hereby severally agrees to indemnify, defend and hold harmless the
Company, and its officers, directors, employees, agents, partners, or
controlling persons (within the meaning of the Act) (each, an "indemnified
party") from and against, and shall reimburse such indemnified party with
respect to, any and all Liabilities to which such indemnified party may become
subject under the Act or otherwise, arising from or relating to (A) any untrue
statement or alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any amendment or
supplement thereto, or (B) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading; provided, that such holders will be liable in any such case to the
extent, and only to the extent, that any such Liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, prospectus or amendment
or supplement thereto in reliance upon and in strict conformity with written
information furnished in an instrument duly executed by such holder
specifically for use in the registration statement.
(iii) Promptly after receipt by any indemnified party of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against another party (the "indemnifying
party") hereunder, notify such party in writing thereof, but the omission so
to notify shall not relieve the indemnifying party from any Liability which it
may have to be indemnified party other than under this section and shall only
relieve it from any Liability which it may have to indemnified party under
this section if and to the extent it is actually prejudiced by such omission.
In case any such action shall be brought against any indemnified party and
such indemnified party shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in and, to
the extent is shall wish, to assume and undertake the defense thereof with
counsel reasonably satisfactory to such indemnified party, and, after notice
from the indemnifying party to the indemnified party of its election so to
assume and undertake the defense thereof, the indemnifying party shall not be
liable to the indemnified party under this section for any legal expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with
counsel so selected, provided, however, that if the defendants in any such
action include both the indemnifying party and such indemnified party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified
party reasonably may be deemed to conflict with the interests of the
indemnifying party, the indemnified party shall have the right to select a
separate counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with (subject to the following
sentence) the reasonable expenses and fees of such separate counsel and other
reasonable expenses related to such participation to be reimbursed by the
indemnifying party as incurred. If the Company is the indemnifying party it
shall pay the reasonable expenses and fees of only one separate counsel whose
selection is approved by the largest group of similarly situated indemnified
parties as measured by the aggregate par value of such Registrable Securities
owned by such group. Any indemnified party who chooses not to be represented
by the foregoing separate counsel shall be entitled, at its own expense, to be
represented by counsel of its own selection.
(g) (i) With respect to the inclusion of Registrable Securities in a
registration statement pursuant to Subsections (b) or (c), all fees, costs and
expenses of and incidental to such registration, inclusion and public offering
shall be borne by the Company; provided, however, that any Selling
Shareholders participating in such registration shall bear their own share of
the underwriting discounts and commissions, and transfer taxes if any,
incurred by them in connection with such registration.
(ii) The fees, costs and expenses of registration to be borne by
the Company as provided in this Subsection (g) shall include, without
limitation, all registration, filing and NASDAQ fees, printing expenses, fees
and disbursements of counsel and accountants for the Company, and all legal
fees and disbursements and other expenses of complying with state securities
or Blue Sky laws of any jurisdiction or jurisdictions in which securities to
be offered are to be registered and qualified. Subject to appropriate
agreements as to confidentiality, and upon reasonable advance notice from the
holder or its counsel, the Company shall make available to counsel for the
holders of Registrable Securities its documents and personnel for due
diligence purposes. Fees and disbursements of counsel and accountants for the
Selling Shareholders shall be borne by the respective Selling Shareholders.
Nothing herein shall require the Company to postpone filing the registration
statement or delay its effectiveness.
(h) The rights to cause the Company to register all or any portion of
Registrable Securities pursuant to this Section may be assigned by Investor to
a transferee or assignee of all or a portion equal to 20% or more, in the
aggregate, of its Shares or the Registrable Securities derived from such
Shares. Any transferee asserting registration rights hereunder shall agree to
be bound by the applicable provisions of this Agreement.
(i) From and after the date of this Agreement, the Company shall not
agree to allow the holders of any securities of the Company to include any of
their securities in any registration statement filed by the Company pursuant
to Subsection (b) unless such inclusion will not reduce the amount of the
Registrable Securities included therein.
ARTICLE II
Representations and Warranties
Section 2.1 Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Investor:
(a) Organization and Qualification. The Company is a corporation duly
incorporated and existing in good standing under the laws of Delaware and has
the requisite corporate power to own its properties and to carry on its
business as now being conducted. The Company does not have any material
subsidiaries except as listed in Exhibit A hereto or in the SEC Documents (as
hereinafter defined). The Company and each such subsidiary, if any, is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary other than those in which the
failure so to qualify would not have a Material Adverse Effect. "Material
Adverse Effect" means any adverse effect on the business, operations,
properties, prospects, or financial condition of the Company and its
subsidiaries taken as a whole.
(b) Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform this agreement and to
issue the Shares in accordance with the terms hereof, (ii) the execution and
delivery of this Agreement by the Company and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Company or
its Board of Directors or stockholders is required, (iii) this Agreement has
been duly executed and delivered by the Company, and (iv) this Agreement
constitutes a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable
principles of general application. The Company's executive officers and
directors have studied and fully understand the nature of the securities being
sold hereunder, and recognize that they have a potential dilutive effect.
(c) Capitalization. The authorized capital stock of the Company consists
of 75,000,000 shares of Common Stock and 10,000,000 shares of preferred stock;
there are approximately 38,000,000 shares of Common Stock and no shares of
preferred stock issued and outstanding; and, upon issuance of the Shares in
accordance with the terms hereof and pursuant to similar agreements of like
tenor, there will be approximately 38,000,000 shares of Common Stock and
approximately 20,000 shares of Series A preferred stock issued and
outstanding. All of the outstanding shares of the Company's Common Stock have
been validly issued and are fully paid and non-assessable. Except as set
forth in Exhibit A hereto or as described in the SEC Documents, no shares of
Common Stock are entitled to preemptive rights or registration rights and
there are not outstanding options, convertible securities, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company, or contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of capital stock of the Company or options, warrants, scrip, rights to
subscribe to, or commitments to purchase or acquire, any shares, or securities
or rights convertible into shares, of capital stock of the Company. The
Company has furnished or made available to the Investor true and correct
copies of the Company's Certificate of Incorporation as in effect on the date
hereof (the "Charter"), and the Company's By-Laws, as in effect on the date
hereof (the "By-Laws").
(d) Issuance of Shares. This issuance of the Shares has been duly
authorized and, when paid for or issued in accordance with the terms hereof,
the Shares shall be validly issued, fully paid and non-assessable and entitled
to the rights and preferences set forth in Schedule I hereto. The Common
Stock issuable upon conversion of the Shares will be duly authorized and
reserved for issuance and, upon conversion in accordance with the Certificate
of Designation to be filed by the Company to establish the rights and
preferences of the Shares, will be validly issued, fully paid and non-
assessable and not subject to any preemptive rights or adverse claims, and the
holders shall be entitled to all rights and preferences accorded to a holder
of Common Stock.
(e) No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby do not and will not (i) result in a violation
of the Company's Charter or By-Laws or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, to give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to
which the Company or any of its subsidiaries is a party, or result in a
violation of any federal, state, local or foreign law, rules, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or any of its subsidiaries or by which
any property or asset of the Company or any of its subsidiaries is bound or
affected (except for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in
the aggregate, have a Material Adverse Effect); provided that, for purposes of
such representation as to federal, state, local or foreign law, rule or
regulation, no representation is made herein with respect to any of the same
applicable solely to the Investor and not to the Company. The business of the
Company is not being conducted in violation of any law, ordinance or
regulations of any governmental entity, except for violations which either
singly or in the aggregate do not and will not have a Material Adverse Effect.
The Company is not required under federal, state or local law, rule or
regulation in the United States to obtain any consent, authorization or order
of, or make any filing (other than the filing of a Certificate setting forth
the terms of the Shares with the Delaware Secretary of State) or registration
with, any court or governmental agency in order for it to execute, deliver or
perform any of its obligations under this Agreement or issue and sell the
Shares in accordance with the terms hereof (other than any SEC, NASD or state
securities filings which may be required to be made by the Company and any
registration statement which may be filed pursuant hereto); provided that, for
purposes of the representation made in this sentence, the Company is assuming
and relying upon the accuracy of the relevant representations and agreements
of the Investor herein. The Investors in the Shares and the stock issuable
upon conversion thereof, and the Placement Agent as holder of warrants to
purchase Shares, are not and will not become upon conversion or exercise
"Acquiring Persons" or otherwise be subject to disabilities or adverse
treatment under any Shareholder Rights Plan of the Company.
(f) SEC Documents, Financial Statement. The Common Stock of the Company
is registered pursuant to Section 12(g) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") and the Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it
with the SEC pursuant to the reporting requirements of the Exchange Act,
including material filed pursuant to Section 13(a) or 15(d), in addition to
one or more registration statements and amendments thereto heretofore filed by
the Company with the SEC (all of the foregoing including filings incorporated
by reference therein being referred to herein as the "SEC Documents"). The
Company has delivered or made available to the Investor true and complete
copies of the quarterly and annual (including, without limitation, proxy
information and solicitation materials) SEC Documents filed with the SEC since
December 31, 1995. The Company has not provided to the Investor any
information which, according to applicable law, rule or regulation, should
have been disclosed publicly by the Company but which has not been so
disclosed, other than with respect to the transactions contemplated by this
Agreement. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the SEC promulgated thereunder except as set forth on Exhibit A
and other federal, state and local laws, rules and regulations applicable to
such SEC Documents, and none of the SEC Documents 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. The
financial statements of the Company included in the SEC Documents comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC or other applicable rules and
regulations with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or
(ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly
present in all material respects the financial position of the Company as of
the dates thereof and the results of operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments).
(g) No Material Adverse Change. Since the date through which the most
recent quarterly report of the Company on Form 10-Q has been prepared and
filed with the SEC, a copy of which is included in the SEC Documents, no event
which would have a Material Adverse Effect has occurred or exists with respect
to the Company or its subsidiaries except as otherwise disclosed or reflected
in other SEC Documents prepared through or as of a date subsequent thereto.
(h) No Undisclosed Events or Circumstances. No event or circumstance has
occurred or exists with respect to the Company or its subsidiaries or their
respective businesses, properties, prospects, operations or financial
condition, which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly
announced or disclosed.
(i) No General Solicitation. Neither the Company, or any of its
affiliates, or, to its knowledge, any person acting on its or their behalf
(including Xxxxxxxx Capital Corp. or CEA Xxxxxxxxxx Media, LLC (the
"Placement Agents")), has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D under the Act) in
connection with the offer or sale of the Shares.
(j) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers
to buy any security, under circumstances that would require registration of
the Shares under the Act.
(k) Approval Commitments. The Company has received binding assurances in
substantially the form of Exhibit B hereto from its executive officers and
directors (excluding the nominee of the National Electrical Benefit Fund) to
the effect that such persons will vote all their shares in favor of such
approval of the transactions contemplated hereby as may be necessary to comply
with any rule or regulation of the NASD or any other regulatory agency. Such
assurances include appointment of any Investor as proxy to vote the shares if
they are not otherwise voted in favor of such approval.
(l) Stand-Off Commitments. The Company has received binding assurances
from its executive officers and directors (excluding the nominee of the
National Electrical Benefit Fund) that none of them or their affiliates will
sell more than 30,000 shares of Common Stock of the Company during the 13
month period following the closing date without the approval of the Placement
Agents.
Section 2.2 Representations and Warranties of the Investor. The Investor
hereby makes the following representations and warranties to the Company:
(a) Authorization, Enforcement. (i) Such Investor has the requisite
power and authority to enter into and perform this Agreement and to purchase
the Shares being sold hereunder, (ii) the execution and delivery of this
Agreement by the Investor and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate or
partnership action, and (iii) this Agreement constitutes a valid and binding
obligation of the Investor enforceable against the Investor in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar
laws relating to, or affecting generally the enforcement of, creditors' rights
and remedies or by other equitable principles of general application.
(b) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by the Investor of the transactions
contemplated hereby do not and will not (i) result in a violation of the
Investor's charter documents or By-Laws or (ii) conflict with any agreement,
indenture or instrument to which Investor is a party, or (iii) result in a
violation of any law, rule, or regulation, or any order, judgment or decree of
any court or governmental agency applicable to Investor. The business of the
Investor is not being conducted in violation of any law or regulation of any
governmental entity, except for possible violations which either singly or in
the aggregate do not and will not have a Material Adverse Effect. The
Investor is not required to obtain any consent or authorization of any
governmental agency in order for it to perform its obligations under this
Agreement. The data to be provided by the Investor in connection with
registering the Registrable Securities under the Act will be true and correct
in all material respects.
(c) Investment Representation. The Investor is purchasing the Shares for
its own account for investment and not with a view to distribution otherwise
than in compliance with the Act. Investor has no present intention to sell
the Shares and Investor has no present arrangement (whether or not legally
binding) to sell the Shares to or through any person or entity; provided,
however, that by making the representations herein, the Investor does not
agree to hold the Shares for any minimum or other specific term and reserves
the right to dispose of the Shares at any time in accordance with federal and
state securities laws applicable to such disposition.
(d) Accredited Investor. The Investor is an accredited investor as
defined in Rule 501 promulgated under the Act. The Investor has such
knowledge and experience in financial and business matters in general, and
investments in particular, so that the Investor is able to evaluate the merits
and risks of an investment in the Shares and to protect its own interests in
connection with such investment. In addition (but without limiting the effect
of the Company's representations and warranties contained herein), the
Investor has received such information as it considers necessary or
appropriate for deciding whether to purchase the Shares pursuant hereto. The
Investor acknowledges that no representation or warranty is made by the
Placement Agents or any persons representing the Placement Agents with respect
to the Company or sale of the Shares.
(e) Rule 144. The Investor understands that there is no public trading
market for the Shares, that none is expected to develop, and that the Shares
must be held indefinitely unless such Shares or securities into which the
Shares are converted are registered under the Act or an exemption from
registration is available. The Investor has been advised or is aware of the
provisions of Rule 144 promulgated under the Act.
ARTICLE III
Covenants
Section 3.1 Securities Compliance.
(a) The Company shall notify the SEC and NASD, in accordance with their
requirements, of the transactions contemplated by this Agreement, and shall
take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Shares and Common Stock issuable upon conversion thereof to
the Investor or subsequent holder.
(b) The Investor understands that the Shares are being offered and sold
in reliance on a transactional exemption from the registration requirements of
federal and state securities laws and that the Company is relying upon the
truth and accuracy of the representations, warranties, agreements,
acknowledgements and understandings of the Investor set forth herein in order
to determine the applicability of such exemptions and the suitability of the
Investor to acquire the Shares.
Section 3.2 Registration and Listing. Until one (1) year after all Shares
have been converted into Common Stock, the Company will cause its Common Stock
(or other securities into which the Shares are convertible) to continue to be
registered under Section 12(b) or 12(g) of the Exchange Act, will comply in
all respects with its reporting and filing obligations under said act, will
comply with all requirements related to any registration statement filed
pursuant to this Agreement and will not take any action or file any document
(whether or not permitted by the Act or the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or
suspend its reporting and filing obligations under said Acts, except as
permitted herein. Until one (1) year after all Shares have been converted
into Common Stock the Company will use commercially reasonable efforts to
continue the listing or trading of its Common Stock (or other securities into
which the Shares are convertible) on NASDAQ and will comply in all respects
with the Company's reporting, filing and other obligations under the bylaws or
rules of NASDAQ.
Section 3.3 Stockholder Approval. The Company will not later than June 30,
1998 submit to its shareholders a proposal to approve issuance of Common Stock
upon conversion of Shares in compliance with the applicable regulation of the
NASD. The Company's board of directors will recommend approval of such
proposal and the Company will use commercially reasonable efforts to obtain
such approval.
Section 3.4 Sale Restrictions. Following conversion of the Shares into
Common Stock of the Company, Investor will not on any trading day offer or
sell publicly on NASDAQ or on the principal exchange on which the Common Stock
is traded, or on any other securities market or securities exchange, on a net
basis, more than the following number of such shares of Common Stock: the
greater of (i) 10% of the average daily trading volume of the Common Stock for
the five trading days immediately preceding such sale as reported by NASDAQ or
by such principal exchange, (ii) 20,000 shares, or (iii) 10% of the trading
volume of the Common Stock on the day of such sale, as reported by NASDAQ or
by such principal exchange.
Section 3.5 Conversion Rights. Investor shall not be entitled to convert
any Share into Common Stock of the Company if following conversion of such
Share the Investor and its affiliates (within the meaning of the Exchange Act)
shall be the beneficial owners (as defined in Rule 13d-3 under the Exchange
Act) of 10% or more of the Common Stock of the Company, or if a lesser
percentage is set forth after the name of the Investor on the signature page
hereof, such lesser percentage. The provisions of this Section cannot be
amended.
Section 3.6 Hedging Restrictions. Investor and its affiliates agree not to
engage in any short sales, swaps, purchasing of puts, or other hedging
activities that involve the direct or indirect use of the Common Stock to
hedge its investment in the Shares, but the Investor may write call options if
the call exercise price is greater than the effective Conversion Price on the
day that the call is written. This Section shall not apply to transactions
not solicited or directed by Investor and in which Investor has no beneficial
interest made on behalf of third-party clients who are not holders of Shares.
This Section shall not apply to short sales made within 3 days of Conversion
of Shares in amounts not greater than the number of shares issuable upon
conversion.
ARTICLE IV
Conditions
Section 4.1 Conditions Precedent to the Obligation of the Company to Sell
the Shares. The obligation hereunder of the Company to issue and/or sell the
Shares to the Investor is subject to the satisfaction, at or before the
Closing, of each of the conditions set forth below. These conditions are for
the Company's sole benefit and may be waived by the Company at any time in its
sole discretion.
(a) Accuracy of the Investor's Representations and Warranties. The
representations and warranties of the Investor shall be true and correct in
all material respects.
(b) Performance by the Investor. The Investor shall have performed all
agreements and satisfied all conditions required to be performed or satisfied
by the Investor at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction
which prohibits the consummation of any of the transactions contemplated by
this Agreement.
Section 4.2 Conditions Precedent to the Obligation of the Investor to
Purchase the Shares. The obligation hereunder of the Investor to acquire and
pay for the Shares is subject to the satisfaction, at or before the Closing,
of each of the conditions set forth below. These conditions are for the
Investor's sole benefit and may be waived by the Investor at any time in its
sole discretion.
(a) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a particular date).
(b) Performance by the Company. The Company shall have performed all
agreements and satisfied all conditions required to be performed or satisfied
by the Company at or prior to Closing.
(c) Listing. The Company's Common Stock shall remain listed and continue
to trade on NASDAQ. Prior to the Closing Date, trading in the Company's
Common Stock shall not have been suspended by the SEC or the NASD (other than
a temporary suspension of not more than one day) and trading in securities
generally as reported by NASDAQ shall not have been suspended or limited or
minimum prices shall not have been established on securities whose trades are
reported by NASDAQ.
(d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction
which prohibits the consummation of any of the transactions contemplated by
this Agreement.
(e) Opinion of Counsel, Etc. At the Closing the Investor shall have
received an opinion of counsel to the Company in the form attached hereto and
such other certificates and documents as the Investor or its counsel shall
reasonably require incident to the Closing.
ARTICLE V
Legend on Stock
Each certificate representing the Shares and, if appropriate, securities
issued upon conversion thereof, shall be stamped or otherwise imprinted with a
legend substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED
FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
The Company agrees to reissue certificates representing the Shares or, if
applicable, the securities issued upon conversion thereof without the legend
set forth above at such time as (i) the holder thereof is permitted to dispose
of such Shares (or securities issued upon conversion thereof) pursuant to Rule
144 under the Act, (ii) the securities are sold to a purchaser or purchasers
who (in the opinion of counsel to such purchasers, in form and substance
reasonably satisfactory to the Company and its counsel) are able to dispose of
such shares publicly without registration under the Act, or (iii) such
securities are included in an effective registration statement under the Act.
ARTICLE VI
Termination
Section 6.1 Termination by Mutual Consent. This Agreement may be terminated
at any time prior to the Closing by the mutual written consent of the Company
and the Investor.
Section 6.2 Other Termination. This Agreement may be terminated by action
of the Board of Directors or other governing body of the Investor or the
Company at any time if the Closing shall not have been consummated by the
fifth business day following the date of this Agreement.
Section 6.3 Automatic Termination. This Agreement shall automatically
terminate without any further action of either party hereto if the Closing
shall not have occurred by the tenth business day following the date of this
Agreement.
ARTICLE VI
Miscellaneous
Section 7.1 Fees and Expenses. Except as otherwise set forth in Section 1.4
hereof, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company will compensate the Placement
Agents and will indemnify them against certain liabilities. The Placement
Agents' compensation includes a cash payment and the issuance of warrants to
the Placement Agents. The Company shall pay all stamp and other taxes and
duties levied in connection with the issuance of the Shares pursuant hereto.
Section 7.2 Specific Enforcement, Consent to Jurisdiction.
(a) The Company and the Investor acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof,
this being in addition to any other remedy to which either of them may be
entitled by law or equity.
(b) Each of the Company and the Investor (i) hereby irrevocably submits
to the jurisdiction of the United States District Court and other courts of
the United States sitting in New York for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement and (ii) hereby
waives, and agrees not to assert in any such suit, action or proceeding, any
claim that is not personally subject to the jurisdiction of such court, that
the suit, action or proceeding is brought in an inconvenient forum or that the
venue of the suit, action or proceeding is improper. Each of the Company and
the Investor consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect
for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
in this paragraph shall affect or limit any right to serve process in any
other manner permitted by law.
Section 7.3 Entire Agreement; Amendment. This Agreement contains the entire
understanding of the parties with respect to the matters covered hereby and,
except as specifically set forth herein, neither the Company nor the Investor
makes any representation, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be waived or amended other
than by a written instrument signed by the parties against whom enforcement of
any such amendment or waiver is sought.
Section 7.4 Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be effective
(a) upon hand delivery or delivery by telex (with correct answer back
received), telecopy or facsimile at the address or number designated below (if
delivered on a business day during normal business hours where such notice is
to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
to the Company: Mr. L. Xxxxx Xxxxx, Chairman of the Board
and Chief Executive Officer
Ramtron International Corporation
0000 Xxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, XX 00000
Fax: (000) 000-0000
with a copy to: Xxxx X. St. Xxxxx
Xxxxxxx Brothers
0000 Xxxx Xxxxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
to the Investor: At the address set forth at the foot of this
Agreement, with copies to Investor's counsel as set
forth at the foot of this Agreement or as specified
in writing by Investor
with a copy to: Xxxxxx X. Xxxxxxxx
Xxxxxxxx Capital Corp.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, XX 00000
Fax: (000) 000-0000
Any party hereto may from time to time change its address for notices by
giving at least 10 days written notice of such changed address to the other
party hereto.
Section 7.5 Waivers. No waiver by either party 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.
Section 7.6 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.
Section 7.7 Successors and Assigns. Except as otherwise provided herein,
this Agreement shall be binding upon and inure to the benefit of the parties
and their successors and assigns. The parties hereto may amend this Agreement
without notice to or the consent of any third party.
Section 7.8 No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 7.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York. Any action or
proceeding relating to this Agreement may be brought in the courts of New York
or in the United States courts located in New York and each of the parties
irrevocably consents to the jurisdiction of such courts in any such action or
proceeding.
Section 7.10 Survival. The representations and warranties of the Company
and the Investor contained in Article II and the agreements and covenants set
forth in Article I, III, V and VII shall survive the Closing.
Section 7.11 Execution. This Agreement may be executed in two or more
counterparts, all of which 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 any signature is delivered by
facsimile transmission, the party using such means of delivery shall cause the
manually executed signature page(s) to be physically delivered to the other
party within five days of the execution hereof.
Section 7.12 Publicity. The Company agrees that it will not disclose, and
will not include in any public announcement, the name of the Investor without
its consent, unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the date hereof.
Ramtron International Corporation
By: /S/ L. Xxxxx Xxxxx 2/25/98
------------------------------
L. Xxxxx Xxxxx
Its: Chairman of the Board and
Chief Executive Officer
Number of Shares THE INVESTOR
By: /S/ Signature
---------------- -------------------------------
Name:
Dollar Amount at Its:
$1,000 per share Investor's address:
$ Percentage limitation, if desired
--------------- -------
EXHIBIT A
1. Conversion option held by the National Electrical Benefit Fund ("NEBF")
to convert all or any portion of Ramtron International Corporation's
outstanding obligations under a Loan Agreement dated August 31, 1995 between
Ramtron International Corporation ("Ramtron") and NEBF (the "Loan
Agreement") into Common Stock of Ramtron pursuant to Section 2.14 of the Loan
Agreement.
2. Registration rights held by NEBF in connection with NEBF's conversion
option described above.
3. Registration rights held by: (i) DFA Group Trust - Small Company
Subtrust, U.S. 9-10 Small Company Portfolio, and DFA Group Trust - 6-10
Subtrust in connection with the issuance and sale of 800,000 (subject to
adjustment) shares of Ramtron Common Stock to those purchasers on December 23,
1997, and (ii) Xxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxxxx, Xxxxxxxx X. Xxxxxxxxxx,
Xxxxxxxx Xxxxxxxx, Xxxxx X. Xxxxxxxxxx Living Trust and Xxx Enterprises, L.P.
in connection with the issuance and sale to those purchasers of Common Stock
Purchase Warrants covering 80,000 (subject to adjustment) shares of Ramtron
Common Stock in connection with the December 23, 1997, sale of Common Stock
described in (i) above.
4. The Company is party to a lawsuit filed on December 9, 1997 by Xxxxx X.
Xxxxxxx, as trustee for the NTC Liquidating Trust. The liquidating trust was
created under Colorado law, in connection with implementation of Chapter 11
plans of liquidation for Xxxx Xxxxxx. The named defendants pursuant to the
case are Ramtron International Corporation, Citibank, N.A. a national banking
association and Xxxxx Brothers Xxxxxxxx & Co. a New York State chartered
private bank.
Xxxxxxx asserts two claims against Ramtron. The First Claim for Relief
alleges that Ramtron, as stock issuer, is liable to four adult daughters of
Xxxx Xxxxxx for a wrongful transfer of certain Ramtron common stock owned by
the daughters, which transfer occurred while Xxxxxx, and related entities (but
not his daughters), were in bankruptcy proceedings. The claim alleges
liability under U.C.C. section 8-311, as embodied in 6 Del.C. section 8-311
(b). The second claim against Ramtron, styled as the Fifth Claim for Relief,
alleges that Ramtron and the other defendants violated the automatic stay by
transferring the daughters' shares while Xxxxxx and his affiliates (but,
again, not the daughters) were in Chapter 11 proceedings.
Xxxxxxx claims a right to pursue the daughters' claims on behalf of the
liquidating trust, based on an assignment of such claims to the trust, from
the daughters and their alleged nominee with respect to the Ramtron shares,
Xxxxx Xxxxxx. The assignment of the claims was made to the trust after the
Chapter 11 plans were confirmed and consummated.
The Complaint's Second, Third and Fourth Claims are state law claims against
Ramtron's transfer agent, Citibank, N.A. and an apparent custodial holder of
the shares, Xxxxx Brothers Xxxxxxxx & Co., based on the same transfer that is
the subject of the claim against Ramtron in the First Claim for Relief.
Pursuant to Ramtron's stock transfer agent agreement with Citibank, N.A.,
Ramtron has agreed to indemnify Citibank, N.A. from all actions or suits
arising out of the agency relationship created under the stock transfer agent
agreement, whereby Citibank N.A. has acted in good faith and without
negligence.
The Claim for Relief under the First claim requests an award of money damages
in an amount not less than the proceeds that were generated by the improper
transfer and unauthorized sales of the Ramtron stock, which amount is not less
than $5,903,646.16. In the alternative, the trust requests to obtain
possession of new certified securities representing ownership of the 523,137
shares of Ramtron stock. The Claim for Relief under the Fifth claim requests
(i) actual and consequential damages (ii) pre-judgement interest at the legal
rate (iii) punitive damages, and (iv) costs and expenses, including attorneys'
fees. In the alternative, the plaintiff requests issuance of new certified
securities, in favor of Plaintiff, representing ownership of 523,137 shares of
Ramtron common stock.
EXHIBIT B
January 30, 1998
To: Prospective Purchasers of Convertible Preferred
Stock of Ramtron International Corporation
Ladies and Gentlemen:
The undersigned are executive officers or directors, and stockholders, of
Ramtron International Corporation (the "Company"). This letter is written
with the understanding that in purchasing shares of the Preferred Stock of the
Company, you will rely on the promises contained in this letter, and we intend
to be bound by such promises.
The stock which you are purchasing is convertible into Common Stock of the
Company. We approve of the issuance to you of the full number of shares of
Common Stock to which you may be entitled upon conversion of your Preferred
Stock, and we hereby undertake to cause a meeting of the shareholders of the
Company to be held no later than June 30, 1998 for the purpose of approving
such issuance and removing any limitation on the number of shares of Common
Stock so issuable.
We will each give a proxy to L. Xxxxx Xxxxx to vote our shares in favor of
approving such matters and Xx. Xxxxx agrees on his part to attend the
shareholders meeting, vote his own shares in favor of approving such matters,
and vote our proxies in favor of approving such matters. In the event that
for any reason Xx. Xxxxx does not vote his own shares, and our proxies, in
favor of approving issuance of the full number of shares of Common Stock
issuable upon conversion of the Preferred Stock and removing any limitation on
the number of shares of Common Stock so issuable, then each of us hereby
irrevocably authorizes any holder of the Preferred Stock (a) to vote as proxy
for each of the undersigned all the shares the undersigned are entitled to
vote in favor of such matters, and (b) to introduce as proxy for the
undersigned a motion to that effect at any meeting of the Company's
stockholders.
Each of us assures you that neither he nor his affiliates will sell more than
30,000 shares of Common Stock of the Company during the 13 month period
following the closing date of the sale of the Preferred Stock, without the
approval of the Placement Agents, Xxxxxxxx Capital Corp. and CEA Xxxxxxxxxx
Media, LLC.
Very truly yours,
/S/ L. Xxxxx Xxxxx /S/ Xxxxxxx X. Xxxx
---------------------------------- ------------------------------------
L. Xxxxx Xxxxx Xxxxxxx X. Xxxx
/S/ Xxxx X. Xxxxx /S/ Xxxxxx X. Xxxxxxxx
---------------------------------- ------------------------------------
Xxxx X. Xxxxx Xxxxxx X. Xxxxxxxx
/S/ Xxxxx X. Xxxxxxx /S/ X. X. Xxxxxx
---------------------------------- ------------------------------------
Xxxxx X. Xxxxxxx X. X. Xxxxxx
/S/ Xxxxxx X. Xxxxxxxxx /S/ Xxxxxxx X. Xxxxxxxxxx
---------------------------------- ------------------------------------
Xxxxxx X. Xxxxxxxxx Xxxxxxx X. Xxxxxxxxxx
/S/ Xxxxxxx X. Xxxxxx
----------------------------------
Xxxxxxx X. Xxxxxx
SCHEDULE I
RESOLUTION ESTABLISHING PREFERENCES
OF
SERIES A CONVERTIBLE PREFERRED STOCK
RESOLVED that there shall be a series of shares of the Preferred Stock of the
Corporation designated "Series A Convertible Preferred Stock"; that the
number of authorized shares of such series shall be 29,000 and that the rights
and preferences of such series (the "Series A Preferred") and the
limitations or restrictions thereon, shall be as follows:
1. Dividends.
(a) The holders of the Series A Preferred shall be entitled to receive
cumulative dividends at the rate of $60.00 per share per annum, payable in
shares of Series A Preferred Stock valued at $1,000 per share, when and as
declared by the Board of Directors. Such dividends shall accrue on any given
share from the day of original issuance of such share and shall accrue from
day to day whether or not declared. Dividends not theretofore paid shall be
paid upon conversion of any shares of the Series A Preferred and shares of
Series A Preferred issued in payment of such dividends shall be simultaneously
converted into Common Stock together with the shares on which such dividends
have accrued.
2. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, the holders of the Series A
Preferred shall be entitled to receive, prior and in preference to any
distribution of any assets of the Corporation to the holders of the Common
Stock or any other class or series of shares except any class or series which
is entitled to priority over the Series A Preferred, the amount of $1,000 per
share plus any accrued but unpaid dividends plus any amounts accrued but
unpaid under Section 1.4(b)(iv) of the Preferred Stock Investment Agreement
under which shares of the Series A Preferred were originally issued (the
"Liquidation Preference").
(b) Subject to the last sentence of this Section, a consolidation or
merger of the Corporation with or into any other corporation or corporations,
or a sale of all or substantially all of the assets of the Corporation, shall,
at the option of the holders of the Series A Preferred, be deemed a
liquidation, dissolution or winding up within the meaning of this Section 2 if
the shares of stock of the Corporation (along with all derivative securities)
outstanding immediately prior to such transaction represent immediately after
such transaction less than a majority of the voting power of the surviving
corporation (or of the acquirer of the Corporation's assets in the case of a
sale of assets). Such option may be exercised by the vote or written consent
of holders of a majority of the Series A Preferred at any time within thirty
calendar days after written notice of the essential terms of such transaction
shall have been given to the holders of the Series A Preferred as provided in
Section 5 hereof. Such notice shall be given by the Corporation immediately
following determination of such essential terms. If such option is exercised,
the holders of the Series A Preferred shall be entitled to receive, in cash,
immediately upon the occurrence of such transaction, an amount per share equal
to the Liquidation Preference. This Section shall not apply to a business
combination in which substantially all the Common Stock of the Corporation is
converted into or exchanged for voting common stock of the corporation
surviving such business combination, if (i) such common stock of the surviving
corporation is listed and traded on the NASDAQ National Market or the New York
Stock Exchange, and (ii) the Board of Directors of the Corporation determines
in good faith that the conversion rights and other rights and preferences of
the Series A Preferred are preserved and not rendered of less value by the
terms of such business combination.
3. Mandatory Conversion.
On the fifth anniversary of the date of issuance, all then outstanding shares
of Series A Preferred including any accrued dividends thereon shall be
automatically converted into Common Stock at the Conversion Price on such
anniversary date and otherwise pursuant to the applicable provisions set forth
in Section 4 hereof.
4. Conversion. The holders of the Series A Preferred shall have optional
conversion rights as follows:
(a) Accrual of Conversion Rights. The Conversion Period shall commence 3
calendar months after the date of issuance, or (if earlier) the date that a
Registration Statement covering resale of the underlying shares of Common
Stock has been declared effective by the Securities and Exchange Commission,
and shall continue thereafter for the life of the issue. Each holder of
record of Series A Preferred shares on the date of commencement of the
Conversion Period (an "Original Holder") shall be entitled to convert in any
calendar month the following percentage of the Series A Preferred shares held
by such holder on the date of commencement of the Conversion Period, on a
cumulative basis following commencement of the Conversion Period. The
percentage for each calendar month will be determined based on the highest of
the daily low trading prices of the Common Stock during such month, as
follows:
Highest of daily low trading Percentage convertible
prices during month during such month
---------------------------- ----------------------
$7.00 to less 20.0%
$7.01 to $7.50 25.0%
$7.51 to $8.00 30.0%
$8.01 to $8.50 35.0%
$8.51 to $9.00 40.0%
$9.01 to $9.50 45.0%
$9.51 or more 50.0%
The number of shares which may be converted in any calendar month shall be
the number determined as above provided plus the number which might have been
but were not converted during earlier calendar months. In the case of
transfers of shares by an Original Holder the Corporation shall make such
notations on its stock ownership records and on the certificates for shares
issued upon transfer so as to reflect the portion (if any) of the transferred
shares which have become convertible pursuant to this provision, or the
Corporation may at its election issue certificates representing the Series A
Preferred shares in such form, or with such annotations, as to reflect the
time or times at which the shares represented by such certificates will become
convertible.
(b) Removal of Limitations. The limitations set forth in Section 4(a)
hereof, with respect to the percentage of Series A Preferred shares which may
be converted during certain time periods, shall terminate and all the Series A
Preferred shares shall thereafter be fully convertible if any of the following
events or conditions shall occur or exist: (i) an event described in Section
2(b) hereof (subject to the exclusion in the last sentence of such Section)
shall occur, whether or not the holders of Series A Preferred deem such event
to be a liquidation; (ii) proceedings for relief under any bankruptcy or
similar law for the relief of debtors are instituted by or against the
Corporation or any of its significant subsidiaries and, if instituted against
the Corporation or such subsidiary, are consented to or not dismissed within
30 days; (iii) the independent auditors of the Corporation shall fail or be
unwilling to express within 90 days after the end of the Corporation's fiscal
year a customary opinion on the financial statements of the Corporation, or
shall express such opinion subject to a "going concern" qualification; (iv)
the Common Stock of the Corporation shall cease to be listed on either the
NASDAQ National Market or the New York Stock Exchange; or (v) there shall be a
material breach by the Corporation of any of its obligations hereunder or
under the Preferred Stock Investment Agreements pursuant to which the Series A
Preferred was originally issued, which breach has a material adverse effect on
the holders of Series A Preferred.
(c) Right to Convert. At and after the time it has become convertible,
each share of Series A Preferred shall be convertible, at the option of the
holder thereof, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing (i) the liquidation preference of
the Series A Preferred share determined pursuant to Section 2(a) hereof on
the date the notice of conversion is given, by (ii) the Conversion Price
determined as hereinafter provided in effect on said date, provided however,
that a share of Series A Preferred shall not be converted into Common Stock if
following such conversion the holder thereof together with affiliates of such
holder would be the beneficial owners (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) of 10% or more of the Common Stock of the
Corporation. A share which may not be converted because of the foregoing
"provided however" clause will thereafter be convertible by any holder
(including the original holder) if at the time such share is submitted for
conversion the "provided however" clause is inapplicable.
(d) Mechanics of Conversion. To convert shares of Series A Preferred into
shares of Common Stock, the holder shall give written notice to the
Corporation (which notice may be given by facsimile transmission) that such
holder elects to convert the same and shall state therein the number of shares
to be converted and the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. Promptly
thereafter the holder shall surrender the certificate or certificates
representing the shares to be converted, duly endorsed, at the office of the
Corporation or of any transfer agent for such shares, or at such other place
designated by the Corporation. The Corporation shall, immediately upon
receipt of such notice, issue and deliver to or upon the order of such holder,
against delivery of the certificates representing the shares which have been
converted, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled, and a certificate representing
the shares of Series A Preferred not so converted, if any. The Corporation
shall effect such issuance immediately and shall transmit the certificates by
messenger or overnight delivery service to reach the address designated by
such holder within three trading days after the receipt of such notice.
Notice of conversion may be given by a holder at any time of day up to 5:00
p.m. Los Angeles time, and such conversion shall be deemed to have been made
immediately prior to the close of business on the date such notice of
conversion is given (the "Conversion Date"). The person or persons entitled
to receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock at the close of business on the Conversion Date.
(e) Determination of Conversion Price.
(i) Until the last day of the sixth full calendar month after the
Closing, the Conversion Price shall be $10.00. Thereafter, subject to the
provisions of subsection (e)(iii) of this Section, on any Conversion Date, the
Conversion Price shall be the lowest trading price of the Common Stock for the
22 consecutive trading days ending with the trading day prior to the
Conversion Date, reduced by the Applicable Percentage (as defined below) in
effect on the Conversion Date.
(ii) The Applicable Percentage shall be as follows:
7.0% starting on the first day of the
seventh (7th) calendar month after Closing.
8.0% starting on the first day of the
eighth (8th) calendar month after Closing.
9.0% starting on the first day of the
ninth (9th) calendar month after Closing.
10.0% starting on the first day of the
tenth (10th) calendar month after Closing.
11.0% starting on the first day of the
eleventh (11th) calendar month after Closing.
12.0% starting on the first day of the
twelfth (12th) calendar month after Closing.
13.0% starting on the first day of the
thirteenth (13th) calendar month after Closing.
14.0% starting on the first day of the
fourteenth (14th) calendar month after Closing.
15.0% starting on the first day of the
fifteenth (15th) calendar month after Closing, and
thereafter
(iii) The Maximum Conversion Price ("Conversion Cap") shall be the
lesser of (i) 85% of the average of the daily low trade prices of the Common
Stock for the fifteenth calendar month after the Closing, (ii) 85% of the
average of the daily low trade prices of the Common Stock for the twenty-first
calendar month after the Closing, or (iii) 85% of the average of the daily
low trade prices of the Common Stock for the twenty-seventh calendar month
after the Closing. The provisions of clauses (i), (ii) and (iii) of the
foregoing sentence shall become effective at the end of the fifteenth,
twenty-first and twenty-seventh calendar months following the Closing,
respectively.
(iv) The terms "low trading price" and "last sale price" of the
Common Stock on any day shall mean, respectively, (A) the lowest reported sale
price and the last reported sale price of the Common Stock on the principal
stock exchange on which the Common Stock is listed, or (B) if the Common Stock
is not listed on a stock exchange, the lowest reported sale price and the last
reported sale price of the Common Stock on the principal automated securities
price quotation system on which sale prices of the Common Stock are reported,
or (C) if the Common Stock is not listed on a stock exchange and sale prices
of the Common Stock are not reported on an automated quotation system, the
lowest bid price and the last bid price for the Common Stock as reported by
National Quotation Bureau Incorporated. If none of the foregoing provisions
are applicable, the "low trading price" and "last sale price" of the
Common Stock on a day will be the fair market value of the Common Stock on
that day as determined by a member firm of the New York Stock Exchange, Inc.,
selected by the Board of Directors of the Corporation. The term "trading
day" means (x) if the Common Stock is listed on at least one stock exchange,
a day on which there is trading on the principal stock exchange on which the
Common Stock is listed, (y) if the Common Stock is not listed on a stock
exchange but sale prices of the Common Stock are reported on an automated
quotation system, a day on which trading is reported on the principal
automated quotation system on which sales of the Common Stock are reported, or
(z) if the foregoing provisions are inapplicable, a day on which quotations
are reported by National Quotation Bureau Incorporated. The term "trading
day" shall not include any day that the New York Stock Exchange closes for at
least one hour because of the "Circuit Breakers" pursuant to Rule 80A or
80B. The "closing price" of the Common Stock on any day means the "last
sale price" as defined above. The term "lowest trading price" of the
Common Stock for a period of several trading days means the lowest of the low
trading prices for each of such trading days.
(v) In the event that during any period of consecutive trading days
provided for herein, the Corporation shall declare or pay any dividend on the
Common Stock payable in Common Stock or in rights to acquire Common Stock, or
shall effect a stock split or reverse stock split, or a combination,
consolidation or reclassification of the Common Stock, then the Conversion
Price and the Conversion Cap shall be proportionately decreased or increased,
as appropriate, to give effect to such event, and like adjustment shall be
made in any price per share specified in dollars in Section 4(a) or elsewhere
herein.
(f) Green Floor. If at any time the Conversion Price falls below a price
designated by the Corporation upon 30 calendar days prior notice given to the
holders of the Series A Preferred (the "Green Floor Price") the Corporation
may at its option, exercised by written notice ("Cash Conversion Notice")
given to the holders of the Series A Preferred twenty calendar days prior to
the effective date specified in such Notice (the "Effective Date") honor any
conversion request otherwise properly made, if at a Conversion Price lower
than the Green Floor Price then in effect, by a cash payment in lieu of the
issuance of Common Stock in an amount equal to the proceeds which would
otherwise have been received by the holder if conversion were in fact made
into Common Stock and such Common Stock were sold at the high trading price on
the Conversion Date (the "Cash Conversion Amount"). A Cash Conversion
Notice shall constitute a representation and warranty by the Corporation that
it has funds available in cash or cash equivalents to pay the Cash Conversion
Amount (computed on the basis of the Green Floor Price then in effect) upon
conversion of all the Series A Preferred shares eligible for conversion at
that time, and that such funds will be set aside and maintained for the
exclusive purpose of satisfying the Corporation's Cash Conversion obligations.
The Cash Conversion Notice shall expressly confirm such representation and
warranty. If thereafter there is a change in the availability of such funds,
the Cash Conversion Notice shall automatically and immediately be cancelled
and the Corporation shall immediately give notice thereof to the holders of
the Series A Preferred. The Cash Conversion Notice may specify an expiration
date of such Notice, or may specify that the Corporation may terminate the
Cash Conversion Notice by further twenty day notice to the holders of Series A
Preferred that the Cash Conversion Notice will not be in effect after a
specified date. The Corporation may re-establish the Green Floor Price, at
its option, not more frequently than once each month, by giving 30 days prior
notice to the holders of the Series A Preferred. If notice of conversion
shall be given by a holder of Series A Preferred shares on a date that a Cash
Conversion Notice is in effect, the Corporation shall within 48 hours
following surrender of the share certificate as provided in Section 4(d)
hereof make payment of the Cash Conversion Amount to such holder by wire
transfer of immediately available funds in U.S. dollars pursuant to such wire
transfer instructions as may have been given by such holder, or otherwise by
mailing by certified mail a bank cashier's or certified check for the Cash
Conversion Amount to the record address of such holder. If the Corporation
fails to make payment of the Cash Conversion Amount to any holder entitled
thereto in the manner and within the time specified above, time being of the
essence, such holder shall be entitled to receive from the Corporation in cash
an amount equal to 3% of the Cash Conversion Amount as compensation to such
holder for such failure on the part of the Corporation, and such holder shall
be entitled to the immediate return of the stock certificate or certificates
representing the Series A Preferred shares submitted by such holder for Cash
Conversion. Then and thereafter (whether or not such certificate or
certificates have been returned) such holder shall have the right to convert
his Series A Preferred shares into Common Stock of the Corporation without
regard to the provisions of this subsection (f). A Cash Conversion Notice
shall cease to be effective if the Corporation fails to make payment of the
Cash Conversion Amount to any holder entitled thereto in the manner and within
the time specified above, time being of the essence, and the Corporation may
not thereafter give a Cash Conversion Notice. The number of shares that a
holder is entitled to convert, determined pursuant to subsections (a) and (b)
of this Section 4, shall not be affected by the giving or effectiveness of a
Cash Conversion Notice. Any Cash Conversion Notice shall be given as provided
in Section 5 hereof.
(g) Distributions. In the event the Corporation shall at any time or from
time to time make or issue, or fix a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other distribution
payable in securities of the Corporation or any of its subsidiaries or other
property, other than cash dividends from earnings, then in each such event
provision shall be made so that the holders of Series A Preferred shall
receive, upon the conversion thereof, the securities or other property which
they would have received had they been the owners on the date of such event of
the number of shares of Common Stock issuable to them upon conversion.
(h) Certificates as to Adjustments. Upon the occurrence of any
adjustments or readjustment of the Conversion Price pursuant to Section
4(e)(v) or Section 4(m) hereof, or any provision for distribution pursuant to
Section 4(g) hereof, or any adjustment of the cash per-share prices specified
herein, the Corporation at its expense shall promptly compute such adjustment,
readjustment or provision in accordance with the terms hereof and prepare and
furnish to each holder of Series A Preferred a certificate setting forth such
adjustment, readjustment or provision and showing in detail the facts upon
which such adjustment, readjustment or provision is based. The Corporation
shall, upon the written request at any time of any holder of Series A
Preferred, furnish or cause to be furnished to such holder a like certificate
prepared by the Corporation setting forth (i) such adjustments and
readjustments, and (ii) the number of other securities and the amount, if any,
of other property which at the time would be received upon the conversion of
Series A Preferred with respect to each share of Common Stock received upon
such conversion. If any holder disputes the computation of such adjustment or
provision the Corporation shall cause independent public accountants selected
by the Corporation to verify and, if necessary, correct such computation.
(i) Notice of Record Date. In the event of any taking by the Corporation
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend
(other than a cash dividend) or other distribution, any security or right
convertible into or entitling the holder thereof to receive additional shares
of Common Stock, or any right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other securities or property, or to
receive any other right, the Corporation shall give notice to each holder of
Series A Preferred at least 10 days prior to such date specifying the date on
which any such record is to be taken for the purpose of such dividend,
distribution, security or right and the amount and character of such dividend,
distribution, security or right.
(j) Issue Taxes. The Corporation shall pay any and all issue and other
taxes, excluding any income, franchise or similar taxes, that may be payable
in respect of any issue or delivery of shares of Common Stock on conversion of
shares of Series A Preferred pursuant hereto; provided, however, that the
Corporation shall not be obligated to pay any transfer taxes resulting from
any transfer requested by any holder in connection with any such conversion.
(k) Reservation of Stock Issuable Upon Conversion. The Corporation shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series A Preferred, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred, and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Series A
Preferred, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for
such purpose, including, without limitation, engaging in best efforts to
obtain the requisite shareholder approval as promptly as practicable.
(l) Fractional Shares. No fractional shares shall be issued upon the
conversion of any share or shares of Series A Preferred. All shares of Common
Stock (including fractions thereof) issuable upon conversion of more than one
share of Series A Preferred by a holder thereof shall be aggregated for
purposes of determining whether the conversion would result in the issuance of
any fractional share. If, after the aforementioned aggregation, the
conversion would result in the issuance of a fraction of a share of Common
Stock, the Corporation shall, in lieu of issuing any fractional share, pay the
holder otherwise entitled to such fraction a sum in cash equal to the fair
market value of such fraction on the date of conversion (as determined in good
faith by the Board of Directors of the Corporation).
(m) Reorganization or Merger. In case of any reorganization or any
reclassification of the capital stock of the Corporation or any consolidation
or merger of the Corporation with or into any other corporation or
corporations or a sale of all or substantially all of the assets of the
Corporation to any other person, and the holders of Series A Preferred do not
elect to treat such transaction as a liquidation, dissolution or winding up as
provided in Section 2, then, as part of such reorganization, consolidation,
merger or sale, provision shall be made so that each share of Series A
Preferred shall thereafter be convertible into the number of shares of stock
or other securities or property (including cash) to which a holder of the
number of shares of Common Stock deliverable upon conversion of such share of
Series A Preferred would have been entitled upon the record date of (or date
of, if no record date is fixed) such event and, in any case, appropriate
adjustment (as determined by the Board of Directors) shall be made in the
application of the provisions herein set forth with respect to the rights and
interests thereafter of the holders of the Series A Preferred, to the end that
the provisions set forth herein shall thereafter be applicable, as nearly as
equivalent as is practicable, in relation to any shares of stock or the
securities or property (including cash) thereafter deliverable upon the
conversion of the shares of Series A Preferred. The Corporation shall have no
obligation to obtain the prior consent of the holders of the Series A
Preferred, individually or as a class, except as expressly provided herein or
as provided by applicable law.
5. Notices. Any notice to be given to the holders of the Series A Preferred
shall be (i) mailed by first class mail postage prepaid to each holder of
Series A Preferred at the address shown on the records of the Corporation for
such holder, (ii) transmitted by telecopy or facsimile transmission to any
holder which has supplied a telecopy or facsimile address to the Corporation,
and (iii) unless receipted for by telecopy or facsimile on the date such
notice is given, shall be transmitted by an overnight delivery service or
courier service for delivery at the address shown on the records of the
Corporation for such holder on the first business day following the date such
notice is given, or if delivery in one business day to such address cannot be
effected by such delivery service, then on the earliest day on which such
delivery can be made.
6. Other Provisions. For all purposes of this Resolution, the term "date of
issuance" or "closing" shall mean the day on which shares of the Series A
Preferred are first issued by the Corporation, and the terms "trading
price," "low trading price," "closing price," "last trade price," and
"trading days" shall have the meanings given them in Section 4(e) hereof.
Any provision herein which conflicts with or violates any applicable usury
law shall be deemed modified to the extent necessary to avoid such conflict or
violation.
7. Restrictions and Limitations. The Corporation shall not undertake the
following actions without the consent of the holders of a majority of the
Series A Preferred: (i) modify its Certificate of Incorporation or Bylaws so
as to amend or change any of the rights, preferences, or privileges of the
Series A Preferred, (ii) authorize or issue any other equity security senior
to or ranking on parity with the Series A Preferred, or (iii) pay any
dividends in cash or property on, or purchase or otherwise acquire for value,
any Common Stock purchase or other equity security of the Corporation either
junior to or on a parity with the Series A Preferred except from current or
retained earnings or from the net proceeds of sale of equity securities,
except for purchases of Common Stock from terminating or retiring employees
pursuant to the terms of employee benefit plans in an aggregate amount not
greater than $1 million.
8. Voting Rights. Except as provided herein or as provided for by law, the
Series A Preferred shall have no voting rights.
9. Attorneys' Fees. Any holder of Series A Preferred shall be entitled to
recover from the Corporation reasonable attorneys' fees and expenses incurred
by such holder in connection with enforcement by such holder of any obligation
of the Corporation hereunder, if such holder is the prevailing party in an
action or proceeding to compel such enforcement.
10. Limitation on Number of Conversion Shares. The Corporation shall not be
obligated to issue, in the aggregate, more than 7,420,000 shares of Common
Stock as presently constituted (the "NASD Cap") upon conversion of the
Series A Preferred, if issuance of a larger number of shares would constitute
a breach of the Rules of NASD. Subject to the obligation to effect certain
redemptions pursuant to the last four sentences of this Section, if further
issuances of shares of Common Stock upon conversion of the Series A Preferred
would constitute a breach of the NASD Rules (i.e., all of the shares permitted
to be issued under the NASD Cap shall have been so issued), then so long
thereafter as such limitation shall continue to be applicable and any shares
of Series A Preferred are submitted for conversion such shares shall receive
in cash an amount equal to the Cash Conversion Amount determined as provided
in Section 4(f) hereof, in lieu of the Common Stock which such shares would
otherwise be entitled to receive upon conversion. Payment of the Cash
Conversion Amount shall be made no later than as specified in Section 4(f) and
shall bear daily interest thereafter at the rate of one-tenth of one percent
per day until paid. The NASD Cap shall be proportionately and equitably
adjusted in the event of stock splits, stock dividends, reverse stock splits,
reclassifications or other such events, in such manner as the Board of
Directors of the Corporation shall reasonably determine. If (A) the
Corporation is unable to obtain shareholder approval concerning
the issuance of shares of Common Stock upon conversion of the Series A
Preferred at a meeting of shareholders of the Corporation held not later than
June 30, 1998, then (B) the Corporation shall immediately redeem, at a
"Special Redemption Price" equal to 110% of the liquidation preference of
such shares, the smallest number of Shares which is sufficient, in the
Corporation's reasonable judgment, such that following such redemption,
conversion of the remaining shares of Series A Preferred would not constitute
a breach of the Corporation's obligations under the NASD Rules. Any
redemption effected pursuant to the preceding sentence shall require 15 days
notice and the Redemption Date shall be not more than 15 days after the date
specified in Clause A of the preceding sentence. Such redemption shall be
made pro-rata. If there shall be a default in payment of the Special
Redemption Price, the amount so payable shall bear daily interest from and
after the Redemption Date at the rate of one-twentieth of one percent per day
until paid.
