EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of March 15,
2000, by and among eGlobe, Inc., a Delaware corporation, with headquarters
located at 0000 00xx Xxxxxx, XX, Xxxxx 000, Xxxxxxxxxx, XX 00000 ("COMPANY") and
each of the purchasers set forth on the signature pages hereto (the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D ("REGULATION D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 ACT");
B. The Company has authorized a new series of preferred stock,
designated as Series Q Convertible Preferred Stock (the "SERIES Q PREFERRED
STOCK"), having the rights, preferences and privileges set forth in the
Certificate of Designations, Rights and Preferences attached hereto as EXHIBIT
"A" (the "CERTIFICATE OF DESIGNATION") and has authorized the issuance to the
Buyers of an aggregate of Ten Thousand (10,000) shares of Series Q Preferred
Stock (together with any shares of Series Q Preferred Stock issued in
replacement thereof or as a dividend thereon or otherwise with respect thereto
in accordance with the terms thereof, the "PREFERRED SHARES");
C. The Series Q Preferred Stock is convertible into shares of common
stock, $.001 par value per share, of the Company (the "COMMON STOCK"), upon the
terms and subject to the limitations and conditions set forth in the Certificate
of Designation;
D. The Company has authorized the issuance to the Buyers of warrants,
in the form attached hereto as EXHIBIT "B-1", to purchase an aggregate of One
Hundred Thousand (100,000) shares of Common Stock (the "FIRST CLOSING WARRANTS")
and warrants, in the form attached hereto as EXHIBIT "B-2", to purchase an
aggregate of One Hundred Fifty Thousand (150,000) shares of Common Stock (the
"SECOND CLOSING WARRANTS" and, together with the First Closing Warrants, the
"WARRANTS"). The shares of Common Stock issuable upon exercise of or otherwise
pursuant to the Warrants are referred to herein collectively as the "WARRANT
SHARES."
E. The Buyers desire to purchase and the Company desires to issue and
sell, upon the terms and conditions set forth in this Agreement, (i) an
aggregate of Ten Thousand (10,000) Preferred Shares and (ii) the Warrants, for
an aggregate purchase price of Ten Million Dollars ($10,000,000);
F. Each Buyer wishes to purchase, upon the terms and conditions stated
in this Agreement, the number of Preferred Shares and Warrants as is set forth
immediately below its name on the signature pages hereto; and
G. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto as EXHIBIT "C" (the "REGISTRATION RIGHTS
AGREEMENT"), pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
NOW, THEREFORE, the Company and each of the Buyers severally (and not
jointly) hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS.
a. PURCHASE OF PREFERRED SHARES AND WARRANTS. On each Closing
Date (as defined below), the Company shall issue and sell to each Buyer and each
Buyer severally agrees to purchase from the Company such number of Preferred
Shares and Warrants for the aggregate purchase price with respect to such
applicable Closing (as defined below) as is set forth immediately below such
Buyer's name on the signature pages hereto. The issuance, sale and purchase of
the Preferred Shares and Warrants shall take place at two (2) closings (each, a
"CLOSING"), the first of which is hereinafter referred to as the "FIRST CLOSING"
and the second of which is referred to as the "SECOND CLOSING." The aggregate
number of Preferred Shares to be issued at the First Closing is Four Thousand
(4,000) for an aggregate purchase price of Four Million Dollars ($4,000,000)
(the "FIRST CLOSING PURCHASE PRICE") and the aggregate number of Preferred
Shares to be issued at the Second Closing is Six Thousand (6,000) for an
aggregate purchase price of Six Million Dollars ($6,000,000) (the "SECOND
CLOSING PURCHASE PRICE" and, collectively with the First Closing Purchase Price,
the "PURCHASE PRICE "). The aggregate number of First Closing Warrants to be
issued at the First Closing is 100,000 and the aggregate number of Second
Closing Warrants to be issued at the Second Closing is 150,000. Subject to the
satisfaction (or waiver) of the conditions thereto set forth in Section 6 and
Section 7 below, (i) at the First Closing, the Company shall issue and sell to
each Buyer and each Buyer shall purchase from the Company the number of
Preferred Shares and First Closing Warrants which such Buyer is purchasing
hereunder and as set forth below such Buyer's name on the signature pages hereto
and (ii) at the Second Closing, the Company shall issue and sell to each Buyer
and each Buyer shall purchase from the Company the number of Preferred Shares
and Second Closing Warrants as is set forth below such Buyer's name on the
signature pages hereto.
b. FORM OF PAYMENT. On each Closing Date (as defined below),
(i) each Buyer shall pay the applicable Purchase Price for the Preferred Shares
and Warrants to be issued and sold to it at the applicable Closing by wire
transfer of immediately available funds to the Company, in accordance with the
Company's written wiring instructions, against delivery of duly executed
certificates representing such number of Preferred Shares and Warrants which
such Buyer is purchasing and (ii) the Company shall deliver such certificates
duly executed on behalf of the Company, to such Buyer, against delivery of such
applicable Purchase Price.
c. CLOSING DATE. Subject to the satisfaction (or waiver) of
the conditions thereto set forth in Section 6 and Section 7 below, the date and
time of the issuance and sale of the Preferred Shares pursuant to this Agreement
(each, a "CLOSING DATE") shall be (i) in the case of the First Closing, 12:00
noon Eastern Standard Time on March 15, 2000 and (ii) in
the case of Second Closing, as soon as practicable (but no later than 12:00 noon
Eastern Standard Time on the fifth (5th) business day) following the
satisfaction (or waiver) of the conditions to the Second Closing set forth in
Sections 6 and 7 below, but in no event shall the Second Closing take place if
the conditions set forth in Sections 6 and 7 are not satisfied or waived prior
to July 15, 2000 or, in each case, such other mutually agreed upon time. Each
closing shall occur on the applicable Closing Date at the offices of Xxxxxxx
Xxxxx Xxxxxxx & Xxxxxxxxx, LLP, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx
00000, or at such other location as may be agreed to by the parties. The parties
may close the transactions contemplated by this Agreement by transmitting
signature pages and copies of other documents via facsimile followed by
overnight delivery and exchange of the originally executed documents.
2. BUYERS' REPRESENTATIONS AND WARRANTIES. Each Buyer severally (and
not jointly) represents and warrants to the Company solely as to such Buyer
that:
a. INVESTMENT PURPOSE. As of the date hereof, the Buyer is
purchasing the Preferred Shares, the shares of Common Stock issuable upon
conversion of or otherwise pursuant to the Preferred Shares (including, without
limitation, such additional shares of Common Stock as are issuable as a result
of the events described in Articles V, VI.D(b) or VI.E of the Certificate of
Designation and Section 2(c) of the Registration Rights Agreement (such shares
of Common Stock being collectively referred to herein as the "CONVERSION
SHARES")), the Warrants and the shares of Common Stock issuable upon exercise of
or otherwise pursuant to the Warrants (the "WARRANT SHARES" and, collectively
with the Preferred Shares, the Conversion Shares and the Warrants, the
"SECURITIES") for its own account and not with a present view towards the public
sale or distribution thereof within the meaning of the 1933 Act, except pursuant
to sales registered or exempted from registration under the 1933 Act; provided,
however, that by making the representations herein, the Buyer does not agree to
hold any of the Securities for any minimum or other specific term and reserves
the right to dispose of the Securities at any time in accordance with or
pursuant to a effective registration statement or an applicable exemption under
the 1933 Act.
b. ACCREDITED INVESTOR STATUS. The Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D promulgated
under the 1933 Act (an "ACCREDITED INVESTOR").
c. RELIANCE ON EXEMPTIONS. The Buyer understands that the
Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
d. INFORMATION. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by the Buyer or its advisors. The Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company. Neither such inquiries nor any other due diligence investigation
conducted by Buyer or any of its advisors or representatives shall modify, amend
or affect Buyer's right to rely on the Company's representations and warranties
contained in Section 3
below. The Buyer understands that its investment in the Securities involves a
significant degree of risk.
e. GOVERNMENTAL REVIEW. The Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
f. TRANSFER OR RE-SALE. The Buyer understands that (i) except
as provided in the Registration Rights Agreement, the sale or re-sale of the
Securities has not been and is not being registered under the 1933 Act or any
applicable state securities laws, and the Securities may not be transferred
unless (a) the Securities are sold pursuant to an effective registration
statement under the 1933 Act, (b) the Buyer shall have delivered to the Company
an opinion of counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to the effect that
the Securities to be sold or transferred may be sold or transferred pursuant to
an exemption from such registration, (c) the Securities are sold or transferred
to an "affiliate" (as defined in Rule 144 promulgated under the 1933 Act (or a
successor rule) ("Rule 144")) of the Buyer who agrees to sell or otherwise
transfer the Securities only in accordance with this Section 2(f) and who is an
Accredited Investor or (d) the Securities are sold pursuant to Rule 144; (ii)
any sale of such Securities made in reliance on Rule 144 may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any re-sale of such Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 0000 Xxx) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such Securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder (in each case, other than pursuant to the Registration Rights
Agreement). Notwithstanding the foregoing or anything else contained herein to
the contrary, the Securities may be pledged as collateral in connection with a
bona fide margin account or other lending arrangement.
g. LEGENDS. The Buyer understands that the Preferred Shares
and Warrants and, until such time as the Conversion Shares and Warrant Shares
have been registered under the 1933 Act as contemplated by the Registration
Rights Agreement or otherwise may be sold pursuant to Rule 144 without any
restriction as to the number of securities as of a particular date that can then
be immediately sold, the Conversion Shares and Warrant Shares, may bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed with the Company's transfer agent against transfer of the
certificates for such Securities):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities may not be sold, transferred or assigned in the
absence of an effective registration statement for the
securities under said Act, or an opinion of counsel, in form,
substance and scope customary for opinions of counsel in
comparable transactions, that registration is not required
under said Act or unless sold pursuant to Rule 144 under said
Act."
The legend set forth above shall be removed and the Company shall issue
or caused to be issued a certificate without such legend to the holder of any
Security upon which it
is stamped, if, unless otherwise required by applicable state securities laws,
(a) such Security is registered for sale under an effective registration
statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144
without any restriction as to the number of securities as of a particular date
that can then be immediately sold, or (b) such holder provides the Company with
an opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a public sale or transfer
of such Security may be made without registration under the 1933 Act and such
sale or transfer is effected, or (c) such holder provides the Company with
reasonable assurances that such Security can be sold pursuant to Rule 144. The
Buyer agrees to sell all Securities, including those represented by a
certificate(s) from which the legend has been removed, in compliance with
applicable securities laws and prospectus delivery requirements, if any.
h. AUTHORIZATION; ENFORCEMENT. (i) The Buyer has all requisite
power, capacity and authority to enter into and perform this Agreement and the
Registration Rights Agreement and to consummate the transactions contemplated
hereby and thereby, (ii) the execution and delivery of this Agreement and the
Registration Rights Agreement, and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by the
Buyer, and (iii) this Agreement has been duly executed and delivered on behalf
of the Buyer, and this Agreement constitutes, and upon execution and delivery by
the Buyer of the Registration Rights Agreement, such agreement will constitute,
valid and binding agreements of the Buyer enforceable in accordance with their
terms.
i. RESIDENCY. The Buyer is a resident of the jurisdiction set
forth immediately below such Buyer's name on the signature pages hereto.
j. NO CONFLICTS. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement by the Buyer and the
consummation by the Buyer of the transactions contemplated hereby and thereby
will not (i) if the Buyer is an entity, conflict with or result in a violation
of any provision of the certificate of incorporation, bylaws or other
organizational documents of the Buyer, (ii) violate or conflict with, or result
in a breach of any provision of, or constitute a default (or an event which with
notice or lapse of time or both could become a default) under any agreement to
which the Buyer is a party, or (iii) result in the violation of any law, rule,
regulation, order, judgment or decree applicable to the Buyer. There are no
agreements, laws or other restrictions of any kind to which the Buyer is a party
or is subject that would prevent or restrict the execution, delivery or
performance of this Agreement by the Buyer.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Buyer that:
a. ORGANIZATION AND QUALIFICATION. The Company and each of its
Subsidiaries (as defined below), if any, is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated, with full power and authority (corporate and other) to
own, lease, use and operate its properties and to carry on its business as and
where now owned, leased, used, operated and conducted. SCHEDULE 3(a) sets forth
a list of all of the Subsidiaries of the Company and the jurisdiction in which
each is incorporated. The Company and each of its Subsidiaries is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which its ownership or use of property or the nature of the
business conducted by it makes such qualification necessary
except where the failure to be so qualified or in good standing would not have a
Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any material adverse
effect on (i) the Securities, (ii) the business, operations, assets, financial
condition or prospects of the Company and its Subsidiaries, if any, taken as a
whole, or (iii) on the transactions contemplated hereby or by the agreements or
instruments to be entered into in connection herewith. "SUBSIDIARIES" means any
corporation or other organization, whether incorporated or unincorporated, in
which the Company owns, directly or indirectly, any equity or other ownership
interest.
b. AUTHORIZATION; ENFORCEMENT. (i) The Company has all
requisite corporate power and authority to file and perform its obligations
under the Certificate of Designation and to enter into and perform this
Agreement, the Registration Rights Agreement and the Warrants and to consummate
the transactions contemplated hereby and thereby and to issue the Securities, in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
this Agreement, the Registration Rights Agreement and the Warrants by the
Company and the consummation by it of the transactions contemplated hereby and
thereby (including without limitation, the issuance of the Preferred Shares and
the Warrants and the issuance and reservation for issuance of the Conversion
Shares and the Warrant Shares issuable upon conversion or exercise of or
otherwise pursuant to the Preferred Shares and the Warrants) have been duly
authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its stockholders is
required, (iii) this Agreement has been duly executed and delivered by the
Company, and (iv) this Agreement constitutes and, upon execution and delivery by
the Company of the Registration Rights Agreement and the Warrants and upon
execution and filing of the Certificate of Designation, each of such agreements
and instruments will constitute, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
c. CAPITALIZATION. The authorized capital stock of the Company
consists of: (a) one hundred million (100,000,000) shares of Common Stock of
which forty-six million, eight hundred fifty thousand, seven hundred forty
(46,850,740) shares were issued and outstanding as of March 15, 2000; and (b)
ten million (10,000,000) shares of preferred stock, par value $.001 per share,
of which, as of March 15, 2000: (i) one hundred twenty-five (125) shares of 8%
Series E Cumulative Convertible Redeemable Preferred Stock are authorized, none
of which are outstanding; (ii) two million twenty thousand (2,020,000) shares of
Series F Convertible Preferred Stock are authorized, none of which are
outstanding; (iii) four hundred thousand (400,000) shares of Series I
Convertible Preferred Stock are authorized, of which two hundred fifty thousand
(250,000) shares are issued and outstanding; (iv) forty (40) shares of 5% Series
J Cumulative Convertible Preferred Stock are authorized, none of which are
outstanding; (v) one (1) share of 20% Series M Cumulative Convertible Preferred
Stock is authorized, issued and outstanding; (vi) sixteen thousand one hundred
(16,100) shares of 10% Series O Cumulative Convertible Preferred Stock are
authorized, issued and outstanding; and (vii) fifteen thousand (15,000) shares
of Series P Convertible Preferred Stock ("SERIES P PREFERRED STOCK") are
authorized, issued and outstanding. In addition, (i) 3,250,000 shares are
reserved for issuance pursuant to Company stock options, (ii) 21,497,988 shares
are reserved for issuance pursuant to securities (other than the Preferred
Shares and the Warrants) exercisable for, or convertible into or exchangeable
for shares of Common Stock (which amount includes 10,921,464 shares issuable
upon conversion of shares of preferred stock (excluding the Preferred Shares),
7,322,357 shares issuable upon exercise of non-contingent warrants and 3,254,167
shares issuable upon exercise of contingent warrants), (iii) 6,000,000 shares
are reserved for issuance upon conversion of the shares of Series P Preferred
Stock and exercise of the warrants issued
pursuant to that certain Securities Purchase Agreement dated as of January 26,
2000 by and between the Company and the Buyers named therein (the "SERIES P
AGREEMENT") and (iv) 4,000,000 shares are reserved for issuance upon conversion
of the Preferred Shares and exercise of the Warrants (subject to adjustment
pursuant to the Company's covenant set forth in Section 4(h) below). All of such
outstanding shares of capital stock are, or upon issuance will be, duly
authorized, validly issued, fully paid and nonassessable. No shares of capital
stock of the Company are subject to preemptive rights or any other similar
rights of the stockholders of the Company or any liens or encumbrances imposed
through the actions or failure to act of the Company. Except as disclosed in
SCHEDULE 3(c), as of the effective date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe for, puts, calls,
rights of first refusal, agreements, understandings, claims or other commitments
or rights of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for any shares of capital stock of the Company
or any of its Subsidiaries, or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries, (ii) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of its or their securities under the 1933 Act (except
the Registration Rights Agreement) and (iii) there are no anti-dilution or price
adjustment provisions contained in any security issued by the Company (or in any
agreement providing rights to security holders) that will be triggered by the
issuance of the Preferred Shares, the Conversion Shares, the Warrants or the
Warrant Shares. The Company has furnished to the Buyer true and correct copies
of the Company's Certificate of Incorporation (including all certificates of
designation of the rights, preferences, privileges and restrictions of the
various existing series of preferred stock of the Company) as in effect on the
date hereof (the "CERTIFICATE OF INCORPORATION"), the Company's By-laws, as in
effect on the date hereof (the "BY-LAWS"), and the terms of all securities
convertible into or exercisable for Common Stock of the Company and the material
rights of the holders thereof in respect thereto. The Company shall provide the
Buyer with a written update of this representation signed by the Company's Chief
Executive or Chief Financial Officer on behalf of the Company as of the
applicable Closing Date.
d. ISSUANCE OF SHARES. The Preferred Shares and the Warrants
are duly authorized and, upon issuance in accordance with the terms of this
Agreement, will be validly issued, fully paid and non-assessable, and free from
all taxes, liens, claims and encumbrances with respect to the issue thereof and
shall not be subject to preemptive rights or other similar rights of
stockholders of the Company and will not impose personal liability upon the
holder thereof. The Conversion Shares and the Warrant Shares are duly authorized
and reserved for issuance and, upon conversion of the Preferred Shares and
exercise of the Warrants in accordance with the terms thereof, will be validly
issued, fully paid and non-assessable, and free from all taxes, liens, claims
and encumbrances with respect to the issuance thereof and will not be subject to
preemptive rights or other similar rights of stockholders of the Company and
will not impose personal liability upon the holder thereof.
e. ACKNOWLEDGMENT OF DILUTION. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the Conversion Shares upon conversion of or otherwise pursuant to
the Preferred Shares and upon issuance of the Warrant Shares upon exercise of or
otherwise pursuant to the Warrants. The Company's directors and executive
officers have studied and fully understand the nature of the Securities being
sold hereunder. The Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of or otherwise pursuant to the Preferred
Shares and
Warrant Shares upon exercise of or otherwise pursuant to the Warrants in
accordance with this Agreement, the Certificate of Designation and the Warrants
is absolute and unconditional regardless of the dilutive effect that such
issuance may have on the ownership interests of other stockholders of the
Company. Taking the foregoing into account, the Company's Board of Directors has
determined, in its good faith business judgment, that the issuance of the
Preferred Shares, the Conversion Shares, the Warrants and the Warrant Shares
hereunder and under the Certificate of Designation and the consummation of the
transactions contemplated hereby and thereby are in the best interest of the
Company and its stockholders.
f. SERIES OF PREFERRED STOCK. The terms, designations, powers,
preferences and relative, participating and optional or special rights, and the
qualifications, limitations and restrictions of each series of preferred stock
of the Company (other than the Preferred Shares) are as stated in the
Certificate of Incorporation, filed on or prior to the date hereof, and the
Bylaws. The terms, designations, powers, preferences and relative, participating
and optional or special rights, and the qualifications, limitations and
restrictions of the Preferred Shares are as stated in the Certificate of
Designation.
g. NO CONFLICTS. The execution, delivery and performance of
this Agreement, the Registration Rights Agreement and the Warrants by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the filing of the Certificate
of Designation and the issuance and reservation for issuance, as applicable, of
the Preferred Shares, Conversion Shares, Warrants and Warrant Shares) will not
(i) conflict with or result in a violation of any provision of the Certificate
of Incorporation or By-laws or (ii) violate or conflict with, or result in a
breach of any provision of, or constitute a default (or an event which with
notice or lapse of time or both could become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument to which the Company
or any of its Subsidiaries is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and regulations of any self-regulatory
organizations to which the Company or its securities are subject) 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). Neither the Company nor any of its Subsidiaries is in violation
of its Certificate of Incorporation, By-laws or other organizational documents
and neither the Company nor any of its Subsidiaries is in default (and no event
has occurred which with notice or lapse of time or both could put the Company or
any of its Subsidiaries in default) under, and neither the Company nor any of
its Subsidiaries has taken any action or failed to take any action that would
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 by which any property or assets of the
Company or any of its Subsidiaries is bound or affected, except for possible
defaults as would not, individually or in the aggregate, have a Material Adverse
Effect. The businesses of the Company and its Subsidiaries, if any, are not
being conducted, and shall not be conducted so long as a Buyer owns any of the
Securities, in violation of any law, ordinance or regulation of any governmental
entity, except where such conduct would not, individually or in the aggregate,
have a Material Adverse Effect. Except as specifically contemplated by this
Agreement and as required under the 1933 Act and any applicable state securities
laws, the Company is not required to obtain any consent, authorization or order
of, or make any filing or registration with,
any court, governmental agency, regulatory agency, self regulatory organization
or stock market or any third party in order for it to execute, deliver or
perform any of its obligations under this Agreement, the Registration Rights
Agreement or the Warrants in accordance with the terms hereof or thereof or to
issue and sell the Preferred Shares and the Warrants in accordance with the
terms hereof and to issue the Conversion Shares upon conversion of or otherwise
pursuant to the Preferred Shares and the Warrant Shares upon exercise of or
otherwise pursuant to the Warrants. Except as disclosed in SCHEDULE 3(g), all
consents, authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof. The Company is not in violation of the
listing requirements of the Nasdaq National Market ("NASDAQ") and does not
reasonably anticipate that the Common Stock will be delisted by the Nasdaq in
the foreseeable future. The Company and its Subsidiaries are unaware of any
facts or circumstances which might give rise to any of the foregoing.
h. SEC DOCUMENTS; FINANCIAL STATEMENTS. Except as set forth on
SCHEDULE 3(h), since December 31, 1997, the Company has timely 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 Securities
Exchange Act of 1934, as amended (the "1934 ACT") (all of the foregoing filed
prior to the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents (other than exhibits to such
documents) incorporated by reference therein, being hereinafter referred to
herein as the "SEC DOCUMENTS"). The Company has made available to each Buyer
true and complete copies of the SEC Documents, except for such exhibits and
incorporated documents. As of their respective dates, the SEC Documents complied
as to form in all material respects with the applicable requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC, 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. None of the statements made in any such SEC Documents is,
or has been, required to be amended or updated under applicable law (except for
such statements as have been amended or updated in subsequent filings prior to
the date hereof). As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with United States generally accepted accounting
principles, consistently applied, 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 consolidated financial position of the Company and
its consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments).
Except as set forth in SCHEDULE 3(h) or in the financial statements of the
Company included in the SEC Documents, the Company has no liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to December 31, 1998 and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under generally accepted accounting principles to be reflected in such
financial statements, which, individually or in the aggregate, are not material
to the financial condition or operating results of the Company.
i. Absence of Certain Changes. Since December 31, 1998 and
except as set forth in the SEC Documents filed after such date, there has been
no material adverse change and no material adverse development in the assets,
liabilities, business, properties, operations, prospects, financial condition or
results of operations of the Company or any of its Subsidiaries.
j. ABSENCE OF LITIGATION. Except as disclosed in the SEC
documents or set forth on SCHEDULE 3(j), there is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company or any of its Subsidiaries, or their officers or directors
in their capacity as such, that could have a Material Adverse Effect. SCHEDULE
3(j) contains a complete list and summary description of any pending or
threatened proceeding against or affecting the Company or any of its
Subsidiaries, without regard to whether it would have a Material Adverse Effect.
The Company and its Subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing.
k. PATENTS, COPYRIGHTS, ETC.; YEAR 2000 COMPLIANCE.
(i) The Company and each of its Subsidiaries owns or
possesses the requisite licenses or rights to use all patents, patent
applications, patent rights, inventions, know-how, trade secrets, trademarks,
trademark applications, service marks, service names, trade names and copyrights
("INTELLECTUAL PROPERTY") necessary to enable it to conduct its business as now
operated (and, except as set forth in SCHEDULE 3(k) hereof, to the best of the
Company's knowledge, as presently contemplated to be operated in the future);
there is no claim or action by any person pertaining to, or proceeding pending,
or to the Company's knowledge threatened, which challenges the right of the
Company or of a Subsidiary with respect to any Intellectual Property necessary
to enable it to conduct its business as now operated (and, except as set forth
in SCHEDULE 3(k) hereof, to the best of the Company's knowledge, as presently
contemplated to be operated in the future); to the best of the Company's
knowledge, the Company's or its Subsidiaries' current and intended products,
services and processes do not infringe on any Intellectual Property or other
rights held by any person; and the Company is unaware of any facts or
circumstances which might give rise to any of the foregoing. The Company and
each of its Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of their Intellectual Property.
(ii) All of the Company's computer software and computer
hardware, and other similar or related items of automated, computerized or
software systems that are used or relied on by the Company in the conduct of its
business or that were, or currently are being, sold or licensed by the Company
to customers (collectively, "INFORMATION TECHNOLOGY"), are Year 2000 Compliant,
except for any such failure to be Year 2000 Compliant that would not have a
Material Adverse Effect. For purposes of this Agreement, the term "YEAR 2000
COMPLIANT" means, with respect to the Company's Information Technology, that the
Information Technology is designed to be used prior to, during and after the
calendar Year 2000 A.D., and the Information Technology used during each such
time period will accurately receive, provide and process date and time data
(including, but not limited to, calculating, comparing and sequencing) from,
into and between the 20th and 21st centuries, including the years 1999 and 2000,
and leap-year calculations, and will not malfunction, cease to function, or
provide invalid
or incorrect results as a result of the date or time data, to the extent that
other information technology, used in combination with the Information
Technology, properly exchanges date and time data with it. The Company has
delivered to the Buyer true and correct copies of all analyses, reports, studies
and similar written information, whether prepared by the Company or another
party, relating to whether the Information Technology is Year 2000 Compliant.
l. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company
nor any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a
party to any contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse Effect.
m. TAX STATUS. Except as set forth on SCHEDULE 3(m), the
Company and each of its Subsidiaries has made or filed all federal, state and
foreign income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith, and has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. Except as set forth on SCHEDULE 3(m), there are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim. The Company
has not executed a waiver with respect to the statute of limitations relating to
the assessment or collection of any foreign, federal, state or local tax. Except
as set forth on SCHEDULE 3(m), none of the Company's tax returns is presently
being audited by any taxing authority.
n. CERTAIN TRANSACTIONS. Except as set forth on SCHEDULE 3(n)
and except for arm's length transactions pursuant to which the Company or any of
its Subsidiaries makes payments in the ordinary course of business upon terms no
less favorable than the Company or any of its Subsidiaries could obtain from
third parties and other than the grant of stock options disclosed on SCHEDULE
3(c), none of the officers, directors, or employees of the Company is presently
a party to any transaction with the Company or any of its Subsidiaries (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
o. DISCLOSURE. All information relating to or concerning the
Company or any of its Subsidiaries set forth in this Agreement and provided to
the Buyers pursuant to Section 2(d) hereof and otherwise in connection with the
transactions contemplated hereby is true and correct in all material respects
and the Company has not omitted to state any material fact necessary in order to
make the statements made herein or therein, in light of the circumstances under
which they were made, not misleading. No event or circumstance has occurred or
exists with respect to the Company or any of its Subsidiaries or its or their
business,
properties, prospects, operations or financial conditions, which has not been
publicly announced or disclosed but, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company (assuming for this
purpose that the Company's reports filed under the 1934 Act are being
incorporated into an effective registration statement filed by the Company under
the 1933 Act).
p. ACKNOWLEDGMENT REGARDING BUYERS' PURCHASE OF SECURITIES.
The Company acknowledges and agrees that the Buyers are acting solely in the
capacity of arm's length purchasers with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no Buyer
is acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and that any statement made by any Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is not advice or a recommendation and is merely incidental
to the Buyers' purchase of the Securities and, except for any such statement
included in this Agreement or the Registration Rights Agreement, has not been
relied upon by the Company, its officers or its directors in any way. The
Company further represents to each Buyer that the Company's decision to enter
into this Agreement has been based solely on the independent evaluation of the
Company and its representatives.
q. 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 under the
1933 Act of the issuance of the Securities to the Buyers. The issuance of the
Securities to the Buyers will not be integrated with any other issuance of the
Company's securities (past, current or future) for purposes of any stockholder
approval provisions applicable to the Company or its securities, except for the
issuance of the Series P Preferred Stock and warrants (the "SERIES P WARRANTS")
issued pursuant to the Series P Agreement and the issuance of Common Stock upon
conversion of the Series P Preferred Stock and upon exercise of the Series P
Warrants.
r. NO BROKERS. The Company has taken no action which would
give rise to any claim by any person (except for Xxxxxx Xxxxxx Xxxxxxxx & Co.,
Inc.) for brokerage commissions, finder's fees or similar payments relating to
this Agreement or the transactions contemplated hereby. Prior to the date of
this Agreement, the Company has furnished to the Buyers a complete and correct
copy of the agreement dated December 1, 1999 between the Company and Xxxxxx
Xxxxxx Xxxxxxxx & Co., Inc. pursuant to which such firm will be entitled to
payment relating to the transactions contemplated by this Agreement.
s. PERMITS; COMPLIANCE. The Company and each of its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (collectively, the "COMPANY
PERMITS"), except where the failure to possess any such Company Permit would not
have a Material Adverse Effect, and there is no action pending or, to the
knowledge of the Company, threatened regarding suspension or cancellation of any
of the Company Permits, except for any such action that would not have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is in
conflict with, or in default or violation of, any of the Company Permits, except
for any such conflicts, defaults or violations which, individually or in the
aggregate, would not
reasonably be expected to have a Material Adverse Effect. Since December 31,
1998, neither the Company nor any of its Subsidiaries has received any
notification with respect to possible conflicts, defaults or violations of
applicable laws, except for notices relating to possible conflicts, defaults or
violations, which conflicts, defaults or violations would not have a Material
Adverse Effect.
t. ENVIRONMENTAL MATTERS.
(i) Except as set forth in SCHEDULE 3(t), there are, to
the Company's knowledge, with respect to the Company or any of its Subsidiaries
or any predecessor of the Company, no past or present violations of
Environmental Laws (as defined below), releases of any material into the
environment, actions, activities, circumstances, conditions, events, incidents,
or contractual obligations which may give rise to any common law environmental
liability or any liability under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 or similar federal, state, local or
foreign laws and neither the Company nor any of its Subsidiaries has received
any notice with respect to any of the foregoing, nor is any action pending or,
to the Company's knowledge, threatened in connection with any of the foregoing.
The term "ENVIRONMENTAL LAWS" means all federal, state, local or foreign laws
relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation, laws relating to
emissions, discharges, releases or threatened releases of chemicals, pollutants
contaminants, or toxic or hazardous substances or wastes (collectively,
"HAZARDOUS MATERIALS") into the environment, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations issued,
entered, promulgated or approved thereunder.
(ii) Other than those that are or were stored, used or
disposed of in compliance with applicable law, no Hazardous Materials are
contained on or about any real property currently owned, or to the best of the
Company's knowledge leased or used, by the Company or any of its Subsidiaries,
and no Hazardous Materials were released on or about any real property
previously owned, or to the Company's knowledge leased or used, by the Company
or any of its Subsidiaries during the period the property was owned, leased or
used by the Company or any of its Subsidiaries, except in the normal course of
the Company's or any of its Subsidiaries' business.
(iii) Except as set forth in Schedule 3(t), there are no
underground storage tanks on or under any real property owned, or to the
Company's knowledge leased or used, by the Company or any of its Subsidiaries
that are not in compliance with applicable law.
u. TITLE TO PROPERTY. The Company and its Subsidiaries have
good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as are described in SCHEDULE 3(u) or
such as would not have a Material Adverse Effect. Any real property and
facilities held under lease by the Company and its Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as would not
have a Material Adverse Effect.
v. INSURANCE. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect.
w. INTERNAL ACCOUNTING CONTROLS. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
x. FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of
its Subsidiaries, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any Subsidiary has, in the course of his
actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977 as amended; or made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
y. SOLVENCY. The Company (both before and after giving effect
to the transactions contemplated by this Agreement) is solvent (i.e., its assets
have a fair market value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and matured) and
currently the Company has no information that would lead it to reasonably
conclude that the Company would not have the ability to, nor does it intend to
take any action that would impair its ability to, pay its debts from time to
time incurred in connection therewith as such debts mature. The Company did not
receive a qualified opinion from its auditors with respect to its most recent
fiscal year end and does not anticipate or know of any basis upon which its
auditors might issue a qualified opinion in respect of its current fiscal year.
z. NO INVESTMENT COMPANY. The Company is not, and upon the
issuance and sale of the Securities as contemplated by this Agreement and the
Certificate of Designation will not be an "investment company" required to be
registered under the Investment Company Act of 1940 (an "INVESTMENT COMPANY").
The Company is not controlled by an Investment Company.
aa. FORM S-1 ELIGIBILITY. The Company is currently eligible to
register the resale of its Common Stock on a registration statement on Form S-1
under the 0000 Xxx. There exist no facts or circumstances that would prohibit or
delay the preparation and filing of a registration statement on Form S-1 with
respect to the Registrable Securities (as defined in the Registration Right
Agreement) within the time periods referred to therein.
4. COVENANTS.
a. BEST EFFORTS. The parties shall use their best efforts to
satisfy timely each of the conditions described in Section 6 and 7 of this
Agreement.
b. FORM D; BLUE SKY LAWS. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date in respect of the First Closing, take such action as the
Company shall reasonably determine is necessary to qualify the Securities for
sale to the Buyers at the Closing pursuant to this Agreement under applicable
securities or "blue sky" laws of the states of the United States (or to obtain
an exemption from such qualification), and shall provide evidence of any such
action so taken to each Buyer on or prior to the Closing Date in respect of the
First Closing.
c. ELIGIBILITY TO USE FORM S-1; Reporting Status. The Company
represents and warrants that it meets the requirements for the use of Form S-1
for registration of the sale by the Buyer of the Registrable Securities (as
defined in the Registration Rights Agreement). So long as the Buyer beneficially
owns any of the Securities, the Company shall timely file all reports required
to be filed with the SEC pursuant to the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination. The Company further agrees to file all reports required to be filed
by the Company with the SEC in a timely manner so as to become eligible, and
thereafter to maintain its eligibility, for the use of Form S-3. The Company
agrees that it will file with the SEC a Current Report on Form 8-K, or an
amendment to the Current Report on Form 8-K filed by the Company on February 15,
2000, within three (3) business days of the Closing Date in respect of the First
Closing, which filing will include as exhibits all of the material agreements
and instruments relating to the transactions contemplated hereby to which the
Company is a party.
d. USE OF PROCEEDS. The Company shall use the proceeds from
the sale of the Preferred Shares in the manner set forth in SCHEDULE 4(d)
attached hereto and made a part hereof and, except as set forth in SCHEDULE
4(d), shall not, directly or indirectly, use such proceeds for any loan to or
investment in any other corporation, partnership, enterprise or other person
(except in connection with its currently existing direct or indirect
Subsidiaries).
e. ADDITIONAL EQUITY CAPITAL; RIGHT OF FIRST OFFER. Subject to
the exceptions described below, the Company will not, without the prior written
consent of a majority-in-interest of the Buyers, negotiate or contract with any
party to obtain additional equity or equity-equivalent financing (including debt
financing with an equity component) during the period (the "LOCK-UP PERIOD")
beginning on the Closing Date in respect of the First Closing and ending on the
date which is one hundred twenty (120) days from the date the Registration
Statement (as defined in the Registration Rights Agreement) is declared
effective (plus any days in which sales cannot be made thereunder). In addition,
subject to the exceptions described
below, if the Company wishes to obtain equity or equity-equivalent financing
(including debt financing with an equity component) ("FUTURE FINANCINGS") during
the period beginning on the Closing Date in respect of the First Closing and
ending twelve (12) months following the date the Registration Statement is
declared effective (plus any days in which sales cannot be made thereunder), it
shall first deliver to each Buyer, at least fifteen (15) business days prior to
offering such Future Financing to any other Person (as defined in Article IV.B
of the Certificate of Designation), written notice describing the proposed
Future Financing, including the terms and conditions thereof, and the Buyers
shall have the exclusive right to negotiate, and the Company shall negotiate in
good faith with the Buyers, during the ten (10) day period following delivery of
such notice, to provide such Future Financing on terms acceptable to the
Company; provided, however, that if the Company and the Buyers are unable to
agree on such terms during such period, the Company shall have the right to
negotiate and contract with any other Person to obtain such Future Financing,
provided that the terms of such Future Financing are no less favorable to the
Company than those terms proposed in such written notice (the limitations
referred to in this sentence and the preceding sentence are collectively
referred to as the "CAPITAL RAISING LIMITATIONS "). In the event the terms and
conditions of a proposed Future Financing are amended in any material respect on
terms which are less favorable to the Company after delivery of the notice to
the Buyers concerning the proposed Future Financing, the Company shall deliver a
new notice to each Buyer describing the amended terms and conditions of the
proposed Future Financing and each Buyer thereafter shall have the exclusive
right during the ten (10) day period following delivery of such new notice to
provide such Future Financing on the same terms as contemplated by such proposed
Future Financing, as amended. The foregoing sentence shall apply to successive
amendments to the terms and conditions of any proposed Future Financing. The
Capital Raising Limitations shall not apply to any transaction involving: (i)
issuances of securities in a firm commitment underwritten public offering
(excluding a continuous offering pursuant to Rule 415 under the 0000 Xxx); or
(ii) issuances of securities as consideration for a merger, consolidation or
purchase of assets, or in connection with any strategic partnership or joint
venture (the primary purpose of which is not to raise equity capital), or in
connection with the disposition or acquisition of a business, product, asset or
license by the Company. The Capital Raising Limitations also shall not apply to
the issuance of securities upon exercise or conversion of the Company's options,
warrants or other convertible securities outstanding as of the date hereof or to
the grant of additional options or warrants, or the issuance of additional
securities, under any Company stock option, restricted stock or other employee
benefit plan approved by the stockholders of the Company.
f. EXPENSES. The Company shall reimburse Xxxx Xxxx Capital
Management, L.P. ("XXXX XXXX") for all reasonable expenses incurred by it in
connection with the negotiation, preparation, execution, delivery and
performance of this Agreement and the other agreements to be executed in
connection herewith, including, without limitation, attorneys' and consultants'
fees and expenses and travel expenses. The Company's obligation to reimburse
Rose Glen's expenses under this Section 4(f) shall be limited to Fifteen
Thousand Dollars ($15,000).
g. FINANCIAL INFORMATION. The Company agrees to send the
following reports to each Buyer until such Buyer transfers, assigns, or sells
all of the Securities: (i) within ten (10) business days after the filing with
the SEC, a copy of its Annual Report on Form 10-K, its Quarterly Reports on Form
10-Q and any Current Reports on Form 8-K; (ii) within one (1) business day after
release, copies of all press releases issued by the Company or any of its
Subsidiaries; and (iii) contemporaneously with the making available or giving to
the
stockholders of the Company, copies of any notices or other information the
Company makes available or gives to such stockholders.
h. RESERVATION OF SHARES. The Company shall use its best
efforts at all times to maintain the number of shares of Common Stock reserved
for issuance upon conversion of the Preferred Shares and upon exercise of the
Warrants at no less than 4,000,000 shares; provided that, in the event that the
Company delivers the Share Limit Waiver (as defined in the Certificate of
Designation), the Company will promptly take all action necessary to reserve
additional shares of Common Stock in accordance with its obligations hereunder,
and the Company shall at all times thereafter have authorized, and reserved for
the purpose of issuance, a sufficient number of shares of Common Stock to
provide for the full conversion of the outstanding Preferred Shares and the
issuance of the Conversion Shares in connection therewith (based on the lesser
of the Variable Conversion Price (as defined in the Certificate of Designation)
in effect from time to time and the Fixed Conversion Price (as defined in the
Certificate of Designation) in effect from time to time) and as otherwise
required by the Certificate of Designation and the full exercise of the Warrants
and the issuance of the Warrant Shares in connection therewith (based on the
exercise price of the Warrants in effect from time to time). The Company shall
not reduce the number of shares of Common Stock reserved for issuance upon
conversion of or otherwise pursuant to the Preferred Shares and upon exercise of
or otherwise pursuant to the Warrants without the consent of each Buyer. Subject
to the first sentence of this Section 4(h), if at any time the number of shares
of Common Stock authorized and reserved for issuance is below the number of
Conversion Shares issued and issuable upon conversion of or otherwise pursuant
to the Preferred Shares (based on the lesser of the Variable Conversion Price in
effect from time to time and the Fixed Conversion Price in effect from time to
time (each as defined in the Certificate of Designation)) and the number of
Warrant Shares issued and issuable upon exercise of or otherwise pursuant to
Warrants (based on the exercise price of the Warrants in effect from time to
time), the Company will promptly take all corporate action necessary to
authorize and reserve a sufficient number of shares, including, without
limitation, calling a special meeting of stockholders to authorize additional
shares to meet the Company's obligations under this Section 4(h), in the case of
an insufficient number of authorized shares, and using its best efforts to
obtain stockholder approval of an increase in such authorized number of shares.
i. LISTING. The Company shall promptly secure the listing of
the Conversion Shares and the Warrant Shares upon each national securities
exchange or automated quotation system, if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance) and, so long as
any Buyer owns any of the Securities shall maintain, so long as any other shares
of Common Stock shall be so listed, such listing of all Conversion Shares from
time to time issuable upon conversion of or otherwise pursuant to the Preferred
Shares and Warrant Shares from time to time issuable upon exercise of or
otherwise pursuant to the Warrants. The Company will obtain and, so long as any
Buyer owns any of the Securities, maintain the listing and trading of its Common
Stock on Nasdaq, the Nasdaq SmallCap Market ("NASDAQ SMALLCAP"), the New York
Stock Exchange ("NYSE"), or the American Stock Exchange (" AMEX") and will
comply in all material respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers ("NASD") and such exchanges, as applicable. The Company shall promptly
provide to each Buyer copies of any notices it receives from Nasdaq and any
other exchanges or quotation systems on which the Common Stock is then listed
regarding the continued eligibility of the Common Stock for listing on such
exchanges and quotation systems.
j. CORPORATE EXISTENCE. So long as a Buyer beneficially owns
any Preferred Shares, the Company shall maintain its corporate existence and
shall not merge, consolidate or sell all or substantially all of the Company's
assets, except in the event of a merger or consolidation or sale of all or
substantially all of the Company's assets, where (i) the surviving or successor
entity (and, if an entity different from the surviving or successor entity, the
entity whose securities into which the Preferred Shares shall become convertible
pursuant to Article VI.C(b) of the Certificate of Designation) in such
transaction assumes the Company's obligations hereunder and under the agreements
and instruments entered into in connection herewith (provided, however, that in
the case of a merger or consolidation in which the Company is not the surviving
entity and in which all of the outstanding shares of capital stock of the
Company are being acquired for or converted into the right to receive
consideration consisting entirely of cash, then the successor or surviving
entity (if not the Company) shall not be obligated to assume the obligations of
the Company under the Certificate of Designation, except for the obligations
under Article IV.B thereof), and (ii) any entity whose securities into which the
Preferred Shares shall become convertible pursuant to Article VI.C(b) of the
Certificate of Designation is a publicly traded corporation whose Common Stock
is listed for trading on Nasdaq, Nasdaq SmallCap, NYSE or AMEX.
k. NO INTEGRATION. The Company shall not make any offers or
sales of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
1933 Act or cause the offering of Securities to be integrated with any other
offering of securities by the Company for the purpose of any stockholder
approval provision applicable to the Company or its securities.
l. TRADING GUIDELINES. So long as a Buyer holds Preferred
Shares, such Buyer covenants and agrees that it will conduct its sales of Common
Stock in compliance with applicable securities laws and will not create any
daily low trading price in the Common Stock.
m. CERTIFICATES OF ELIMINATION. The Company shall promptly
file Certificates of Elimination with the Secretary of State of the State of
Delaware with respect to each series of its outstanding preferred stock which is
fully converted by the holders thereof or redeemed by the Company upon such
conversion or redemption.
n. STOCKHOLDER APPROVAL. Unless the Company otherwise receives
written guidance from Nasdaq in substance and scope satisfactory to the Buyers
(the "NON-INTEGRATION LETTER") that the issuance of Securities pursuant hereto
and pursuant to the terms of the Certificate of Designation and the Warrants
will not be integrated with the issuance of the Series P Preferred Stock, the
Series P Warrants and the shares of Common Stock issuable upon conversion and
exercise of, or otherwise with respect to, the Series P Preferred Stock and the
Series P Warrants for purposes of Nasdaq rules (including Rule 4460), the
Company shall, at its next annual meeting of stockholders which will be held on
or prior to July 31, 2000, obtain such approvals of the Company's stockholders
as may be required to issue all of the shares of Common Stock issuable upon
conversion and exercise of, or otherwise with respect to, the Preferred Shares,
the Warrants and the shares of Series P Preferred Stock and the Series P
Warrants in accordance with applicable law and the rules and regulations of
Nasdaq (including Rule 4460) (the "20% RULE APPROVAL"). The Company shall comply
with the filing and disclosure requirements of Section 14 under the Exchange
Act, and the rules and regulations
thereunder, in connection with the solicitation, acquisition and the disclosure
of the 20% Rule Approval. The Company represents and warrants that its Board of
Directors has approved, and will recommend that the Company's stockholders
approve, the proposal contemplated by this Section 4(n) and shall so indicate
such recommendation in the proxy statement used to solicit the 20% Rule
Approval. The Company shall use its best efforts to cause its officers and
directors to vote in favor of the proposal contemplated by this Section 4(n).
5. TRANSFER AGENT INSTRUCTIONS. The Company shall issue irrevocable
instructions to its transfer agent to issue certificates, registered in the name
of each Buyer or its nominee, for the Conversion Shares and the Warrant Shares
in such amounts as specified from time to time by each Buyer to the Company upon
conversion of the Preferred Shares or exercise of the Warrants in accordance
with the terms thereof (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). Prior to
registration of the Conversion Shares and the Warrant Shares under the 1933 Act
or the date on which the Conversion Shares and the Warrant Shares may be sold
pursuant to Rule 144 without any restriction as to the number of securities as
of a particular date that can then be immediately sold, all such certificates
shall bear the restrictive legend specified in Section 2(g) of this Agreement.
The Company warrants that no instruction other than the Irrevocable Transfer
Agent Instructions referred to in this Section 5, and stop transfer instructions
to give effect to Section 2(f) hereof (in the case of the Conversion Shares and
the Warrant Shares, prior to registration of the Conversion Shares and the
Warrant Shares under the 1933 Act or the date on which the Conversion Shares and
the Warrant Shares may be sold pursuant to Rule 144 without any restriction as
to the number of securities as of a particular date that can then be immediately
sold), will be given by the Company to its transfer agent and that the
Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the Registration
Rights Agreement. Nothing in this Section shall affect in any way the Buyer's
obligations and agreement set forth in Section 2(g) hereof to comply with all
applicable securities laws and prospectus delivery requirements, if any, upon
re-sale of the Securities. If a Buyer provides the Company with (i) an opinion
of counsel, in form, substance and scope customary for opinions in comparable
transactions, to the effect that a public sale or transfer of such Securities
may be made without registration under the 1933 Act and such sale or transfer is
effected or (ii) the Buyer provides reasonable assurances that the Securities
can be sold pursuant to Rule 144, the Company shall permit the transfer, and, in
the case of the Conversion Shares and the Warrant Shares, promptly instruct its
transfer agent to issue one or more certificates, free from any restrictive
legend, in such name and in such denominations as specified by such Buyer.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of
the Company hereunder to issue and sell the Preferred Shares and Warrants to a
Buyer at each of the First Closing and the Second Closing is subject to the
satisfaction, at or before the Closing Date in respect of such applicable
Closing, of each of the following conditions thereto, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion:
a. With respect to the First Closing and the Second Closing:
(i) The applicable Buyer shall have executed this
Agreement and the Registration Rights Agreement and delivered the same to the
Company.
(ii) The applicable Buyer shall have delivered the
applicable Purchase Price in accordance with Section 1(b) above.
(iii) The Certificate of Designation shall have been
accepted for filing with the Secretary of State of the State of Delaware.
(iv) The representations and warranties of the applicable
Buyer shall be true and correct in all material respects as of the date when
made and as of the applicable Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date, which
representations and warranties shall be true and correct as of such date), and
the applicable Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the applicable Buyer at
or prior to the applicable Closing Date.
(v) No litigation, statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. The obligation of
each Buyer hereunder to purchase the Preferred Shares and the Warrants at each
of the First Closing and the Second Closing is subject to the satisfaction, at
or before the Closing Date in respect of such applicable Closing, of each of the
following conditions, provided that these conditions are for such Buyer's sole
benefit and may be waived by such Buyer at any time in its sole discretion:
a. With respect to the First Closing and the Second Closing:
(i) The Company shall have executed this Agreement and
the Registration Rights Agreement and delivered the same to the Buyer.
(ii) The Company shall have delivered to such Buyer duly
executed certificates (in such denominations as the Buyer shall request)
representing the Preferred Shares and duly executed Warrants purchased at such
applicable Closing in accordance with Section 1(b) above.
(iii) The Certificate of Designation shall have been
accepted for filing with the Secretary of State of the State of Delaware, and a
copy thereof certified by such Secretary of State shall have been delivered to
such Buyer.
(iv) The Irrevocable Transfer Agent Instructions, in form
and substance satisfactory to a majority-in-interest of the Buyers, shall have
been delivered to and acknowledged in writing by the Company's Transfer Agent.
(v) 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 applicable Closing Date as though made at such time (except for
representations and warranties that speak as of a specific date, which
representations and warranties shall be true and correct as of such date) and
the Company shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or
complied with by the Company at or prior to the applicable Closing Date. The
Buyer shall have received a certificate or certificates, executed by the chief
executive officer or chief financial officer of the Company, dated as of the
applicable Closing Date, to the foregoing effect and as to such other matters as
may be reasonably requested by such Buyer including, but not limited to
certificates with respect to the Company's Certificate of Incorporation, By-laws
and Board of Directors' resolutions relating to the transactions contemplated
hereby.
(vi) No litigation, statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
(vii) The Conversion Shares and the Warrant Shares shall
have been authorized for listing on Nasdaq (subject to official notice of
issuance) and trading in the Common Stock on Nasdaq shall not have been
suspended by the SEC or Nasdaq.
(viii) The Buyer shall have received an opinion of the
Company's counsel, dated as of the applicable Closing Date, in form, scope and
substance reasonably satisfactory to the Buyer and in substantially the same
form as Exhibit "D" attached hereto.
(ix) The Buyer shall have received an officer's
certificate described in Section 3(c) above, dated as of the applicable Closing
Date.
(x) No material adverse change or development in the
business, operations, properties, prospects, financial condition or operations
of the Company shall have occurred since the date hereof; provided that no
decrease in the trading price of the Common Stock on Nasdaq shall in and to
itself be considered to be such a material adverse change or development.
(xi) The Company 's Series X, X, X, X, X, X, X and N
preferred stock shall have been converted or eliminated and the] only remaining
series of preferred stock authorized and/or outstanding shall be Series E, F, I,
J, L, M, O and P preferred stock.
(xii) The proposed merger between the Company and Trans
Global Communications, Inc. shall not have been abandoned, canceled, terminated,
or the terms thereof materially altered (in a manner materially adverse to the
Company) from those previously publicly announced, nor shall there have been any
public announcement that such merger may not be consummated.
b. With respect to the Second Closing:
(i) The Registration Statement (as defined in the
Registration Rights Agreement) registering the resale by the Buyers of the
shares of Common Stock issuable upon conversion and exercise of, or otherwise
with respect to, the Preferred Shares, the Warrants, the Series P Preferred
Stock and the Series P Warrants in accordance with the terms of the Registration
Rights Agreement and that certain Registration Rights Agreement, dated as of
January 26, 2000, by and among the Company and the other signatories thereto,
shall have been declared effective and no stop order shall have issued in
respect thereof.
8. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
agreements made and to be performed in the State of Delaware (without regard to
principles of conflict of laws). The parties irrevocably consent to the
jurisdiction of the United States federal courts and the state courts located in
Delaware with respect to any suit or proceeding based on or arising under this
Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby and irrevocably agree that all
claims in respect of such suit or proceeding may be determined in such courts.
The parties irrevocably waive the defense of an inconvenient forum to the
maintenance of such suit or proceeding. The parties further agree that service
of process upon a party mailed by first class mail shall be deemed in every
respect effective service of process upon the party in any such suit or
proceeding. Nothing herein shall affect either party's right to serve process in
any other manner permitted by law. The parties agree that a final non-appealable
judgment in any such suit or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on such judgment or in any other lawful manner.
b. COUNTERPARTS; SIGNATURES BY FACSIMILE. This Agreement may
be executed in one 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. This Agreement, once
executed by a party, may be delivered to the other parties hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
c. HEADINGS. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyer
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
an instrument in writing signed by the party to be charged with enforcement.
f. NOTICES. Any notices required or permitted to be given
under the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular United States
mail, or upon receipt, if delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile, in each case addressed
to a party. The addresses for such communications shall be:
If to the Company:
eGlobe, Inc.
0000 00xx Xxxxxx, XX
Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Chairman of the Board and Chief Executive Officer
Facsimile: (000) 000-0000
With copy to:
Xxxxx & Xxxxxxx L.L.P
Columbia Square
000 00xx Xxxxxx, XX
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
If to a Buyer: To the address set forth immediately below such
Buyer's name on the signature pages hereto.
With copy to:
Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, LLP
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
Each party shall provide notice to the other party of any
change in address.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, subject to Section 2(f), any Buyer may assign its
rights hereunder to (i) any of its "affiliates," as that term is defined under
the 1934 Act and (ii) any person that purchases Securities in a private
transaction from a Buyer, without the consent of the Company.
h. 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.
i. SURVIVAL. The representations and warranties of the Company
and the Buyers and the agreements and covenants set forth in Sections 2, 3, 4, 5
and 8 shall survive the closings hereunder notwithstanding any due diligence
investigation conducted by or on behalf of the Company or the Buyers. The
Company agrees to indemnify and hold harmless
each of the Buyers and all their officers, directors, employees and agents for
loss or damage arising as a result of or related to any breach or alleged breach
by the Company of any of its representations, warranties and covenants set forth
in Sections 3 and 4 hereof or any of its covenants and obligations under this
Agreement or the Registration Rights Agreement, including advancement of
expenses as they are incurred. Each Buyer agrees, severally and not jointly, to
indemnify and hold harmless the Company and its officers, directors, employees
and agents for loss or damage arising as a result of or related to any breach or
alleged breach by such Buyer of any of its representations, warranties and
covenants set forth in Sections 2 and 4 hereof or any of its covenants and
obligations under this Agreement, including advancement of expenses as they are
incurred.
j. PUBLICITY. The Company and each of the Buyers shall have
the right to review a reasonable period of time before issuance of any press
releases, filings with the SEC, the NASD or any stock exchange or interdealer
quotation system, or any other public statements with respect to the
transactions contemplated hereby; provided, however, that the Company shall be
entitled, without the prior approval of each of the Buyers, to make any press
release or public filings with respect to such transactions as is required by
applicable law and regulations (although each of the Buyers shall be consulted
by the Company in connection with any such press release prior to its release
and shall be provided with a copy thereof and be given an opportunity to comment
thereon).
k. FURTHER ASSURANCES. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. NO STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
m. REMEDIES. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to each Buyer by vitiating
the intent and purpose of the transactions contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement, that each
Buyer shall be entitled, in addition to all other available remedies in law or
in equity, to an injunction or injunctions to prevent or cure any breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions of this Agreement, without the necessity of showing economic loss and
without any bond or other security being required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused
this Agreement to be duly executed as of the date first above written.
EGLOBE, INC.
By:
Xxxxxxxxxxx X. Xxxxx
Chairman of the Board and Chief Executive Officer
RGC INTERNATIONAL INVESTORS, LDC
By: Xxxx Xxxx Capital Management, L.P.,
Investment Manager
By: RGC General Partner Corp.,
as General Partner
By:
Xxxxx X. Xxxxx
Managing Director
RESIDENCE: Cayman Islands
ADDRESS:
c/o Xxxx Xxxx Capital Management, L.P.
0 Xxxx Xxxxx Xxxx, Xxxxx 000
000 Xx. Xxxxxx Xxxx
Xxxx Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
AGGREGATE SUBSCRIPTION AMOUNT:
First Closing
Number of Preferred Shares: 4,000
Number of First Closing Warrants: 100,000
Aggregate Purchase Price: $4,000,000
Second Closing
Number of Preferred Shares: 6,000
Number of Second Closing Warrants: 150,000
Aggregate Purchase Price: $6,000,000
