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EXHIBIT 10.26
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of
acceptance set forth below, is entered into by and between HOMECOM
COMMUNICATIONS, INC., a Delaware corporation, with headquarters located at 0000
Xxxxxxxxx Xxxx, Xxxxxxxx 00, Xxxxx 000, Xxxxxxx, XX 00000 (the "Company"), and
the undersigned (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and
delivering this Agreement in accordance with and in reliance upon the exemption
from securities registration afforded, inter alia, 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"), and/or Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and
subject to the conditions of this Agreement, shares of the Series A Convertible
Preferred Stock, par value $0.01 per share (the "Convertible Preferred Stock"),
of the Company which which will be convertible into shares of Common Stock,
$0.0001 par value per share of the Company (the "Common Stock"), upon the terms
and subject to the conditions of the such Convertible Preferred Stock, together
with the Warrants (as defined below) exercisable for the purchase of shares of
Common Stock (the "Warrant Shares"), and subject to acceptance of this Agreement
by the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
A. PURCHASE; CERTAIN DEFINITIONS. (i) The undersigned hereby
agrees to purchase from the Company shares of the Convertible Preferred Stock in
the amount set forth on the signature page of this Agreement (the "Preferred
Stock"), out of a total offering of $2,000,000 of such Convertible Preferred
Stock, and having the terms and conditions set forth in the Certificate of
Designation, Rights, Preferences, Qualifications, Limitations and Restrictions
of the Company attached hereto as ANNEX I (the "Certificate of Designations").
Without limiting the terms provided in the Certificate of Designations, the
Convertible Preferred Stock shall provide that of any outstanding shares of such
Convertible Preferred Stock shall automatically convert into Common Stock on the
second anniversary of the Closing Date (the "Maturity Date") on the terms
provided in the Certificate of Designations for a voluntary conversion (a
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"Mandatory Conversion") The purchase price for the Preferred Stock shall be as
set forth on the signature page hereto (the "Purchase Price") and shall be
payable in United States Dollars.
(ii) As used herein, the term "Preferred Stock" means the
Preferred Stock, together with all shares, if any, of the securities of the
Company issued as dividends thereon, unless the context otherwise requires.
(iii) As used herein, the term "Securities" means the
Preferred Stock, the Warrants and the Common Stock issuable upon conversion of
the Preferred Stock or the exercise of the Warrants.
B. FORM OF PAYMENT. The Buyer shall pay the Purchase Price
(less, with the consent of the Company, an amount not to exceed, with respect to
such Buyer, (i) $25,000, multiplied by (ii) a fraction (the "Buyer Fraction"),
of which the numerator is the Purchase Price for the Preferred Stock being
purchased by such Buyer and the denominator is $2,000,000) by delivering
immediately available good funds in United States Dollars to the escrow agent
(the "Escrow Agent") identified in the Joint Escrow Instructions attached hereto
as ANNEX II (the "Joint Escrow Instructions"). No later than the Closing Date
(as defined below), but in any event promptly following payment by the Buyer to
the Escrow Agent of such amount of the Purchase Price, the Company shall deliver
the Preferred Stock duly executed on behalf of the Company to the Escrow Agent
or such party designated in writing by the Escrow Agent. By signing this
Agreement, each of the Buyer and the Company, subject to acceptance by the
Escrow Agent, agrees to all of the terms and conditions of, and becomes a party
to, the Joint Escrow Instructions, all of the provisions of which are
incorporated herein by this reference as if set forth in full.
C. METHOD OF PAYMENT. Payment into escrow on account of the
Purchase Price shall be made by wire transfer of funds to:
Bank of New York
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA# 000000000
For credit to the account of Xxxxxxx & Xxxxxx, Esqs.
Account No.: -
The Buyer represents and warrants that, on or before the date of the Buyer's
execution of this Agreement, the Buyer has deposited the Purchase Price (subject
to adjustment as contemplated by Section 1(b) hereof, with the Escrow Agent.
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D. ESCROW PROPERTY. Funds deposited on account of the Purchase
Price and certificates representing the Preferred Stock delivered to the Escrow
Agent as contemplated by Sections 1(b) and (c) hereof are referred to as the
"Escrow Property."
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
A. Without limiting the Buyer's right to sell the Common Stock
pursuant to the Registration Statement (as that term is defined in the
Registration Rights Agreement defined below), the Buyer is purchasing the
Preferred Stock and the Warrants and will be acquiring the shares of Common
Stock issuable upon conversion of the Preferred Stock (the "Converted Shares")
and the Warrant Shares for its own account for investment only and not with a
view towards the public sale or distribution thereof and not with a view to or
for sale in connection with any distribution thereof.
B. The Buyer is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3), (ii) experienced in making investments of the kind
described in this Agreement and the related documents, (iii) able, by reason of
the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its investment
in the Securities.
C. All subsequent offers and sales of the Preferred Stock and
the shares of Common Stock representing the Converted Shares and the Warrant
Shares (such Common Stock sometimes referred to as the "Shares") by the Buyer
shall be made pursuant to registration of the Shares under the 1933 Act or
pursuant to an exemption from registration.
D. The Buyer understands that the Preferred Stock is being
offered and sold to it in reliance on 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
Preferred Stock.
E. 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 Preferred Stock and
the offer of the Shares which have been requested by the Buyer, including ANNEX
V hereto. The Buyer and its advisors, if any, have been afforded the
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opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries. Without limiting the generality of
the foregoing, the Buyer has obtained and reviewed the Company's (1)
Registration Statement on Form S-1, filed with the SEC on September 18, 1996, as
amended on November 1, 1996, March 19, 1997, April 15, 1997 and April 29, 1997,
(2) Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 1997,
June 30, 1997 and September 30, 1997, and (3) Current Report on Form 8-K, dated
October 9, 1997 (the "Company's SEC Documents").
F. The Buyer understands that its investment in the Securities
involves a high degree of risk.
G. The Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities.
H. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Buyer and is a valid and binding
agreement of the Buyer enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
I. Notwithstanding the provisions hereof or of the Preferred
Stock, in no event (except (i) with respect to a Mandatory Conversion or (ii) if
the Company is in default under any provision of the Certificate of Designations
or of any of the Transaction Agreements, as defined below) shall the holder be
entitled to convert any Preferred Stock to the extent that, after such
conversion, the sum of (1) the number of shares of Common Stock beneficially
owned by the Buyer and its affiliates (other than shares of Common Stock which
may be deemed beneficially owned through the ownership of the unconverted
portion of the Preferred Stock), and (2) the number of shares of Common Stock
issuable upon the conversion of the Preferred Stock with respect to which the
determination of this proviso is being made, would result in beneficial
ownership by the Buyer and its affiliates of more than 4.99% of the outstanding
shares of Common Stock. For purposes of the proviso to the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act"),
except as otherwise provided in clause (1) of such proviso.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
A. CONCERNING THE PREFERRED STOCK AND THE SHARES. The
Preferred Stock has been duly authorized, and when issued, will be duly and
validly issued, fully paid and non-assessable and will not subject the holder
thereof to personal liability by reason of being such
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holder. There are no preemptive rights of any stockholder of the Company, as
such, to acquire the Preferred Stock, the Warrants or the Shares.
B. REPORTING COMPANY STATUS. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business, operations
or condition (financial or otherwise) of the Company. The Company has registered
its Common Stock pursuant to Section 12 of the 1934 Act, and the Common Stock is
listed and traded on The NASDAQ/SmallCap Market. The Company has received no
notice, either oral or written, with respect to the continued eligibility of the
Common Stock for such listing, and the Company has maintained all requirements
for the continuation of such listing; provided, however, that the Buyer
acknowledges that the Company, prior to the date hereof, is not in compliance
with the continuation requirements of The NASDAQ/SmallCap Market which were
adopted in August 1997 and will be applicable to the Company commencing in
February 1998.
C. AUTHORIZED SHARES. The Company has sufficient authorized
and unissued Shares as may be reasonably necessary to effect the conversion of
the Preferred Stock and to issue the Warrant Shares. The Converted Shares and
the Warrant Shares have been duly authorized and, when issued upon conversion
of, or as interest on, the Preferred Stock or upon exercise of the Warrants,
each in accordance with its respective terms, will be duly and validly issued,
fully paid and non-assessable and will not subject the holder thereof to
personal liability by reason of being such holder.
D. SECURITIES PURCHASE AGREEMENT; REGISTRATION RIGHTS
AGREEMENT AND STOCK. This Agreement and the Registration Rights Agreement, the
form of which is attached hereto as ANNEX IV (the "Registration Rights
Agreement"), and the transactions contemplated thereby, have been duly and
validly authorized by the Company, this Agreement has been duly executed and
delivered by the Company and this Agreement is, and the Warrants and the
Registration Rights Agreement, when executed and delivered by the Company, will
be, valid and binding agreements of the Company enforceable in accordance with
their respective terms, subject as to enforceability to general principles of
equity and to bankruptcy, insolvency, moratorium, and other similar laws
affecting the enforcement of creditors' rights generally; and the Preferred
Stock will be duly and validly authorized and, when executed and delivered on
behalf of the Company in accordance with this Agreement, will be a valid and
binding obligation of the Company in accordance with its terms, subject to
general principles of equity and to bankruptcy, insolvency, moratorium, or other
similar laws affecting the enforcement of creditors' rights generally.
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E. NON-CONTRAVENTION. Except as provided in ANNEX V hereto,
the execution and delivery of this Agreement and the Registration Rights
Agreement by the Company, the issuance of the Securities, and the consummation
by the Company of the other transactions contemplated by this Agreement, the
Registration Rights Agreement, and the Preferred Stock do not and will not
conflict with or result in a breach by the Company of any of the terms or
provisions of, or constitute a default under (i) the articles of incorporation
or by-laws of the Company, each as currently in effect, (ii) any indenture,
mortgage, deed of trust, or other material agreement or instrument to which the
Company is a party or by which it or any of its properties or assets are bound,
including any listing agreement for the Common Stock except as herein set forth,
(iii) to its knowledge, any existing applicable law, rule, or regulation or any
applicable decree, judgment, or order of any court, United States federal or
state regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, or (iv) the
Company's listing agreement for its Common Stock, except such conflict, breach
or default which would not have a material adverse effect on the Company or on
the transactions contemplated herein.
F. APPROVALS. Except as provided in ANNEX V hereto, no
authorization, approval or consent of any court, governmental body, regulatory
agency, self-regulatory organization, or stock exchange or market or the
Stockholders of the Company is required to be obtained by the Company for the
issuance and sale of the Securities to the Buyer as contemplated by this
Agreement, except such authorizations, approvals and consents that have been
obtained.
G. SEC FILINGS. None of the Company's SEC Documents contained,
at the time they were filed, any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary to make
the statements made therein in light of the circumstances under which they were
made, not misleading. Except as set forth on ANNEX V hereto, the Company has
since October 1, 1996 timely filed all requisite forms, reports and exhibits
thereto with the SEC.
H. ABSENCE OF CERTAIN CHANGES. Since September 30, 1997, there
has been no material adverse change and no material adverse development in the
business, properties, operations, condition (financial or otherwise), or results
of operations of the Company, except as disclosed in ANNEX V or in the Company's
SEC Documents. Since September 30, 1997, except as provided in the Company's SEC
Documents, the Company has not (i) incurred or become subject to any material
liabilities (absolute or contingent) except liabilities incurred in the ordinary
course of business consistent with past practices; (ii) discharged or satisfied
any material lien or encumbrance or paid any material obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business consistent with past practices; (iii) declared or made any
payment or distribution of cash or other property to stockholders with respect
to its capital stock, or purchased or redeemed, or made any agreements to
purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts or claims, except
in the ordinary course of business consistent with past practices; (v) suffered
any substantial losses (other than losses from operations for the last
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quarter of calendar year 1997) or waived any rights of material value, whether
or not in the ordinary course of business, or suffered the loss of any material
amount of existing business; (vi) made any changes in employee compensation,
except in the ordinary course of business consistent with past practices; or
(vii) experienced any material problems with labor or management in connection
with the terms and conditions of their employment.
I. FULL DISCLOSURE. There is no fact known to the Company
(other than general economic conditions known to the public generally or as
disclosed in the Company's SEC Documents), that has not been disclosed in
writing to the Buyer that (i) would reasonably be expected to have a material
adverse effect on the business or financial condition of the Company or (ii)
would reasonably be expected to materially and adversely affect the ability of
the Company to perform its obligations pursuant to this Agreement or any of the
agreements contemplated hereby (collectively, including this Agreement, the
"Transaction Agreements").
J. ABSENCE OF LITIGATION. Except as set forth in ANNEX V
hereto, and in the Company's SEC Documents, there is no action, suit,
proceeding, inquiry or investigation before or by any court, public board or
body pending or, to the knowledge of the Company, threatened against or
affecting the Company, wherein an unfavorable decision, ruling or finding would
have a material adverse effect on the properties, business or financial
condition, or results of operation of the Company and its subsidiaries taken as
a whole or the transactions contemplated by any of the Transaction Agreements or
which would adversely affect the validity or enforceability of, or the authority
or ability of the Company to perform its obligations under, any of the
Transaction Agreements.
K. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in ANNEX
V hereto and Section 3(e) hereof, no Event of Default (or its equivalent term),
as defined in the respective agreement to which the Company is a party, and no
event which, with the giving of notice or the passage of time or both, would
become an Event of Default (or its equivalent term) (as so defined in such
agreement), has occurred and is continuing, which would have a material adverse
effect on the Company's financial condition or results of operations.
L. PRIOR ISSUES. Except as set forth in ANNEX V, during the
twelve (12) months preceding the date hereof, the Company has not issued any
convertible securities.
M. NO UNDISCLOSED LIABILITIES OR EVENTS. Except as set forth
in ANNEX V hereto, the Company has no liabilities or obligations other than
those disclosed in the Company's SEC Documents or those incurred in the ordinary
course of the Company's business since September 30, 1997, and which
individually or in the aggregate, do not or would not have a material adverse
effect on the properties, business, condition (financial or otherwise), or
results of operations of the Company. No event or circumstances has occurred or
exists with respect to the Company or its properties, business, condition
(financial or otherwise), or results of operations, which, under applicable law,
rule or regulation, requires public disclosure or
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announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed.
N. NO DEFAULT. The Company is not in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any material indenture, mortgage, deed of trust or other
material instrument or agreement to which it is a party or by which it or its
property is bound.
O. NO INTEGRATED OFFERING. Neither the Company nor any of its
affiliates nor any person acting on its or their behalf has, directly or
indirectly, at any time since October 1, 1996, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under Rule
506 of Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
P. DILUTION. The number of Shares issuable upon conversion of
the Preferred Stock and the exercise of the Warrants may increase substantially
in certain circumstances, including, but not necessarily limited to, the
circumstance wherein the trading price of the Common Stock declines prior to the
conversion of the Preferred Stock. The Company's executive officers and
directors have studied and fully understand the nature of the Securities being
sold hereby and recognize that they have a potential dilutive effect. The board
of directors of the Company has concluded, in its good faith business judgment,
that such issuance is in the best interests of the Company. The Company
specifically acknowledges that its obligation to issue the Shares upon
conversion of the Preferred Stock and upon exercise of the Warrants is binding
upon the Company and enforceable regardless of the dilution such issuance may
have on the ownership interests of other shareholders of the Company.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
A. TRANSFER RESTRICTIONS. The Buyer acknowledges that (1) the
Preferred Stock has not been and is not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Agreement, the
Shares have not been and are not being registered under the 1933 Act, and may
not be transferred unless (A) subsequently registered thereunder or (B) the
Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Securities made in
reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale 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 used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other
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person is under any obligation to register the Securities (other than pursuant
to the Registration Rights Agreement) under the 1933 Act or to comply with the
terms and conditions of any exemption thereunder.
B. RESTRICTIVE LEGEND. The Buyer acknowledges and agrees that
the Preferred Stock and the Warrants, and, until such time as the Common Stock
has been registered under the 1933 Act as contemplated by the Registration
Rights Agreement and sold in accordance with an effective Registration
Statement, certificates and other instruments representing any of the Securities
shall bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of any such Securities):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD
OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF
COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT
SUCH REGISTRATION IS NOT REQUIRED.
C. REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to
enter into the Registration Rights Agreement on or before the Closing Date.
D. FILINGS. The Company undertakes and agrees to make all
necessary filings in connection with the sale of the Preferred Stock to the
Buyer under any United States laws and regulations applicable to the Company, or
by any domestic securities exchange or trading market, and to provide a copy
thereof to the Buyer promptly after such filing.
E. REPORTING STATUS. So long as the Buyer beneficially owns
any of the Preferred Stock, the Company shall file all reports required to be
filed with the SEC pursuant to Section 13 or 15(d) of 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 will take all reasonable action under
its control to continue the listing and trading of its Common Stock on The
NASDAQ/SmallCap Market and will comply in all material respects with the
Company's reporting, filing and other obligations under the by-laws or rules of
the National Association of Securities Dealers, Inc. ("NASD") or The
NASDAQ/SmallCap Market.
F. USE OF PROCEEDS. The Company will use the proceeds from the
sale of the Preferred Stock (excluding amounts paid by the Company for legal
fees, finder's fees and escrow fees in connection with the sale of the Preferred
Stock) for internal working capital purposes, and shall not, directly or
indirectly, use such proceeds for any loan to or investment in any other
corporation, partnership, enterprise or other person.
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G. CERTAIN AGREEMENTS. (i) The Company covenants and agrees
that it will not, without the prior written consent of the Buyer, enter into any
subsequent or further offer or sale of Common Stock or securities convertible
into Common Stock (collectively, "New Common Stock") with any third party
pursuant to a transaction which in any manner permits the sale of the New Common
Stock on any date which is earlier than ninety (90) days after the Effective
Date (as defined below).
(ii) The provisions of subparagraph (g)(i) will not apply to
(x) the issuance of securities (other than for cash) in connection with an
acquisition, merger, consolidation, sale of assets, disposition, or (y) the
exchange of the capital stock for assets, stock or other joint venture
interests; provided, however, that any action contemplated under this
subparagraph (g)(ii) is subject to the condition that registration rights, if
any, in connection with such action shall not require the filing of a
Registration Statement in respect of such stock prior to sixty (60) days after
the Effective Date.
(iii) If and only if the Registration Statement is then
currently effective, the provisions of subparagraph (g)(i) will also not apply
to an underwritten public offering of shares of Common Stock, provided such
offering is made at at least the then market price of the shares of Common Stock
(subject to discounts to market customary for secondary underwritten offerings).
(iv) The term "Effective Date" means the effective date of
the Registration Statement covering the Registrable Securities.
H. AVAILABLE SHARES. The Company shall have at all times
authorized and reserved for issuance, free from preemptive rights, shares of
Common Stock sufficient to yield one hundred fifty percent (150%) of the number
of shares of Common Stock issuable (i) at conversion as may be required to
satisfy the conversion rights of the Buyer pursuant to the terms and conditions
of the Preferred Stock (assuming for such purposes that all Preferred Stock is
currently eligible to be converted, whether or not such eligibility in fact
exists at any given time) and (ii) upon exercise as may be required to satisfy
the exercise rights of the Buyer pursuant to the terms and conditions of the
Warrants (assuming for such purposes that all Warrants are currently eligible to
be exercised, whether or not such eligibility in fact exists at any given time).
I. WARRANTS. (i) The Company agrees to issue to the Buyer on
or immediately after the Closing Date transferable warrants in the form annexed
hereto as ANNEX VI (the "Warrants"), for the purchase of the number of shares of
Common Stock equal to seventy-five thousand (75,000) multiplied by the Buyer
Fraction, together with registration rights as provided in the Registration
Rights Agreement. The Warrants shall bear an exercise price equal to a
percentage of the closing bid price of the Common Stock on the Closing Date in
accordance with the following schedule:
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At Price (as Percentage of
Amount of Warrants Exercisable Closing Date Closing Bid Price)
------------------------------ --------------------------------
625/750 of the shares of Common Stock covered by the Warrant 110%
125/750 of the shares of Common Stock covered by the Warrant 120%
(ii) The Warrants shall be exercisable during the period
commencing six (6) months after the Closing Date and continuing through and
including the third anniversary of the Closing Date, and during such period
shall be exercisable in whole or in part at any time or from time to time.
(iii) The Warrants may not be transferred except as
contemplated by Section 5 hereof.
(iv) The Buyer acknowledges that the Warrants provide that,
under certain circumstances specified therein, the holder of Warrant Shares may
be restricted from transferring such Warrant Shares.
J. CERTAIN PROVISIONS REGARDING REDEMPTION OF PREFERRED STOCK.
Anything in the Certificate of Designations or elsewhere in the Transaction
Agreements to the contrary notwithstanding, the Company agrees that in the event
the Company gives a Redemption Notice as provided in Section 6 of the
Certificate of Designations, but does not timely pay the Redemption Price to the
Buyer as provided in Section 6.1 of the Certificate of Designations, (i) the
Company shall pay to the holder of such Preferred Stock as liquidated damages an
amount equal to two and one-half percent (2.5%) of the liquidation amount of
such Preferred Stock, (ii) the Redemption Notice shall be deemed null and void
ab initio, (iii) the Company may not issue another Redemption Notice for a
period of sixty (60) days from the last date the Redemption Price was due, (iv)
in the sole and absolute discretion of the holder of the Preferred Stock, any
Conversion Notice issued prior to the Redemption Notice shall be honored in
accordance with its terms or deemed withdrawn, and (v) the holder of the
Preferred Stock will retain all rights to issue a Conversion Notice, subject to
the right of the Company to issue a Redemption Notice after the expiration of
the period referred to in the preceding clause (iii) of this paragraph.
K. HEDGING TRANSACTIONS. Prior to the time that the Buyer has
converted at least sixty percent (60%) of the Preferred Stock originally
acquired by the Buyer hereby, the Buyer shall not, directly or indirectly,
engage in any short or other hedging transaction, such as option writing, equity
swaps or other types of derivative transactions in the Common Stock or other
securities of the Company or acquire or establish any "put equivalent position"
within the meaning of Rule 16a-1 promulgated under the 1934 Act.
5. TRANSFER AGENT INSTRUCTIONS.
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a. Promptly following the Closing Date, the Company will
irrevocably instruct its transfer agent to issue Common Stock from time to time
upon conversion of the Preferred Stock in such amounts as specified from time to
time by the Company to the transfer agent, bearing the restrictive legend
specified in Section 4(b) of this Agreement prior to registration of the Shares
under the 1933 Act, registered in the name of the Buyer or its nominee and in
such denominations to be specified by the Buyer in connection with each
conversion of the Preferred Stock. The Company warrants that no instruction
other than such instructions referred to in this Section 5 and stop transfer
instructions to give effect to Section 4(a) hereof prior to registration and
sale of the Shares under the 1933 Act will be given by the Company to the
transfer agent and that the Shares shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this
Agreement, the Registration Rights Agreement, and applicable law. Nothing in
this Section shall affect in any way the Buyer's obligations and agreement to
comply with all applicable securities laws upon resale of the Securities. If the
Buyer provides the Company with an opinion of counsel, which counsel and which
opinion shall be reasonably satisfactory to the Company and its counsel, that
registration of a resale by the Buyer of any of the Securities in accordance
with clause (1)(B) of Section 4(a) of this Agreement is not required under the
1933 Act and that such shares may be transferred to the transferee free of
resale restrictions, the Company shall (except as provided in clause (2) of
Section 4(a) of this Agreement) permit the transfer of the Securities and, in
the case of the Converted Shares or the Warrant Shares, as the case may be,
promptly instruct the Company's transfer agent to issue one or more certificates
for Common Stock without legend in such name and in such denominations as
specified by the Buyer.
b. (i) The Company will permit the Buyer to exercise its
right to convert the Preferred Stock by telecopying an executed and completed
Notice of Conversion to the Company at (000) 000-0000, Attn: President, with a
copy telecopied to the Company's counsel at (000) 000-0000, Attn: Xxx X. Xxxxxx,
III, Esq. (or such other telecopier numbers or addressees as may be identified
by notice from the Company to the Buyer in the manner contemplated by Section 11
hereof) and by delivering within three (3) business days thereafter, the
original Notice of Conversion and the certificates representing the Preferred
Stock being converted, with duly accompanied stock power executed by the Buyer
with signature thereon acknowledged by a Medallion Guaranty, to the Company by
express courier, with a copy to the transfer agent.
(ii) The term "Conversion Date" means, with respect to any
conversion elected by the holder of the Preferred Stock, the date specified in
the Notice of Conversion, provided the copy of the Notice of Conversion is
telecopied to or otherwise delivered to the Company in accordance with the
provisions hereof so that is received by the Company on or before such specified
date and the original Notice of Conversion and accompanying certificates of the
converted Preferred Stock, duly endorsed as contemplated by the immediately
preceding subparagraph (i), are received by the Company within the three (3)
business days referred to in said subparagraph (i). If any of the foregoing
conditions is not met, the Conversion Date shall be the first business day
following actual receipt by the Company of the Notice of Conversion. The
Conversion Date for the Mandatory Conversion shall be the Maturity Date.
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(iii) the Company will transmit (or cause it transfer
agent to transmit) the certificates representing the Converted Shares issuable
upon conversion of any Preferred Stock (together with certificates representing
the Preferred Stock not being so converted) to the Buyer via express courier, by
electronic transfer or otherwise, within three (3) business days after receipt
by the Company of the original Notice of Conversion and the certificate
representing the Preferred Stock being converted (the "Delivery Date").
(iv) Anything herein to the contrary notwithstanding, the
Buyer specifically acknowledges that the right to convert the Preferred Stock
may be limited by the provisions of Section 5.2 of the Certificate of
Designations, which Section provides for certain restrictions on the time when
such conversions can be effected.
c. The Company understands that a delay in the issuance of the
shares of Common Stock beyond the Delivery Date could result in economic loss to
the Buyer. As compensation to the Buyer for such loss, the Company agrees to pay
late payments to the Buyer for late issuance of Shares upon Conversion in
accordance with the following schedule (where "Number of Business Days Late" is
defined as the number of business days beyond five (5) business days from
Delivery Date:
Late Payment For Each $10,000
Number of of Preferred Stock Liquidation
Business Days Late Amount Being Converted
------------------ -------------------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 +$200 for each Business
Day Late beyond 10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Nothing herein shall limit the Buyer's right to
pursue actual damages for the Company's failure to issue and deliver the Common
Stock to the Buyer. Furthermore, in addition to any other remedies which may be
available to the Buyer, in the event that the Company fails for any reason to
effect delivery of such shares of Common Stock within five
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(5) business days after the Delivery Date, the Buyer will be entitled to revoke
the relevant Notice of Conversion by delivering a notice to such effect to the
Company whereupon the Company and the Buyer shall each be restored to their
respective positions immediately prior to delivery of such Notice of Conversion.
d. If, by the relevant Delivery Date, the Company fails for
any reason to deliver the Shares to be issued upon conversion of the Preferred
Stock and after such Delivery Date, the holder of the Preferred Stock being
converted (a "Converting Holder") purchases, in an open market transaction or
otherwise, shares of Common Stock (the "Covering Shares") in order to make
delivery in satisfaction of a sale of Common Stock by the Converting Holder not
in material violation of the terms of this Agreement (the "Sold Shares"), which
delivery such Converting Holder anticipated to make using the Shares to be
issued upon such conversion (a "Buy-In"), the Company shall pay to the
Converting Holder, in addition to all other amounts contemplated in other
provisions of the Transaction Agreements, and not in lieu thereof, the Buy-In
Adjustment Amount (as defined below). The "Buy-In Adjustment Amount" is the
amount equal to the excess, if any, of (x) the Converting Holder's total
purchase price (including brokerage commissions, if any) for the Covering Shares
over (y) the net proceeds (after brokerage commissions, if any) received by the
Converting Holder from the sale of the Sold Shares. The Company shall pay the
Buy-In Adjustment Amount to the Company in immediately available funds
immediately upon demand by the Converting Holder. By way of illustration and not
in limitation of the foregoing, if the Converting Holder purchases shares of
Common Stock having a total purchase price (including brokerage commissions) of
$11,000 to cover a Buy-In with respect to shares of Common Stock it sold for net
proceeds of $10,000, the Buy-In Adjustment Amount which Company will be required
to pay to the Converting Holder will be $1,000.
e. In lieu of delivering physical certificates representing
the Common Stock issuable upon conversion, provided the Company's transfer agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer program, upon request of the Buyer and its compliance with
the provisions contained in this paragraph, so long as the certificates therefor
do not bear a legend and the Buyer thereof is not obligated to return such
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Buyer by crediting the account of Buyer's
Prime Broker with DTC through its Deposit Withdrawal Agent Commission system.
6. DELIVERY INSTRUCTIONS.
The Preferred Stock shall be delivered by the Company to the
Escrow Agent pursuant to Section 1(b) hereof, on a delivery against payment
basis, no later than on the Closing Date.
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7. CLOSING DATE.
(i) The closing of the issuance and sale of the Preferred
Stock shall occur on the date (the "Closing Date") which is the first NYSE
trading day after
(x) the Escrow Agent advises the Company and the Buyer in writing that
the Escrow Agent or its authorized designee, as the case may be, has
received (1) the Purchase Price (subject to adjustment as provided in
Section 1(b) hereof), (2) each of this Agreement and the Registration
Rights Agreement executed by the Company, (3) this Agreement executed
by the Buyer, and (4) the Preferred Stock as provided in Section 1(c)
hereof; and
(y) the fulfillment or waiver of all other closing conditions
pursuant to Sections 8 and 9 hereof
or such other date and time as is mutually agreed upon in writing by the Company
and the Buyer, but in no event later than December 31, 1997.
(ii) The closing of the purchase and issuance of Preferred
Stock shall occur on the Closing Date at the offices of the Escrow Agent and
shall take place no later than 12:00 Noon, New York time, on such day or such
other time as is mutually agreed upon by the Company and the Buyer.
(iii) Notwithstanding anything to the contrary contained
herein, the Escrow Agent will be authorized to release the Escrow Property only
upon satisfaction of the conditions set forth in Sections 8 and 9 hereof.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell
the Preferred Stock to the Buyer pursuant to this Agreement on the Closing Date
is conditioned upon:
A. The execution and delivery of this Agreement by the Buyer;
B. Delivery by or the Buyer to the Escrow Agent of good
funds as payment in full of the Purchase Price (adjusted as contemplated by
Section 1(b) hereof) in accordance with this Agreement;
C. The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement, as if made on such date,
and the performance by the Buyer on or before such date of all covenants and
agreements of the Buyer required to be performed on or before such date;
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D. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained; and
E. The completion and execution of an Investor Questionnaire,
substantially in the form of ANNEX VII annexed hereto, by the Buyer and the
delivery thereof to the Company.
9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to
purchase the Preferred Stock on the Closing Date is conditioned upon:
A. The execution and delivery of this Agreement and the
Registration Rights Agreement by the Company;
B. Delivery by the Company to the Escrow Agent of the
Preferred Stock in accordance with this Agreement;
C. The accuracy in all material respects on the Closing Date
of the representations and warranties of the Company contained in this
Agreement. as if made on such date, and the performance by the Company on or
before such date of all covenants and agreements of the Company required to be
performed on or before such date;
D. The Registration Rights Agreement shall be in full force
and effect on the Closing Date and the Company shall not be in default
thereunder; and
E. On or before the Closing Date, the Buyer or the Escrow
Agent shall have received an opinion of counsel for the Company, dated the
Closing Date, in form, scope and substance reasonably satisfactory to the Buyer,
substantially to the effect set forth in ANNEX III attached hereto.
10. GOVERNING LAW: MISCELLANEOUS.
a. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Delaware for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions.
b. A facsimile transmission of this signed Agreement shall be
legal and binding on all parties hereto.
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c. This Agreement may be signed in one or more counterparts,
each of which shall be deemed an original.
d. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement. Terms used in the singular case shall be deemed to refer to the
plural case and terms used in the plural case shall be deemed to refer to the
singular case, unless the context otherwise requires. Terms used in the
masculine, feminine or neuter gender shall be deemed to refer to any other
gender, unless the context otherwise requires.
e. 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. f. This
Agreement may be amended only by an instrument in writing signed by the party to
be charged with enforcement thereof.
g. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
11. NOTICES. Except as and to the extent otherwise specified
herein (such as with respect to the giving of a Notice of Conversion), any
notice which shall be required or permitted hereunder shall be given in writing
and shall be deemed effectively given on the earliest of
(i) the date delivered, if delivered by personal delivery as
against written receipt therefor or by confirmed facsimile
transmission,
(ii) the seventh business day after deposit, postage prepaid,
in the United States Postal Service by registered or certified
mail, or
(iii) the third business day after mailing by recognized
international express courier, with delivery costs and fees
prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
COMPANY: HOMECOM COMMUNICATIONS, INC.
0000 Xxxxxxxxx Xxxx
Xxxxxxxx 00, Xxxxx 000
Xxxxxxx, XX 00000
ATTN: Xxxxxx X. Xxx
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Telecopier No.: (404) 237- 3060
Telephone No.: (404) 237 - 4646
with a copy to:
Xxxxxx, Xxxxxxx & Xxxxxx
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxx 0000
Xxxxxxx, XX 00000
ATTN: Xxx X. Xxxxxx, III, Esq.
Telecopier No.: (404) 365 - 9532
Telephone No.: (404) 233 - 7000
BUYER: At the address set forth on the signature page
of this Agreement.
ESCROW AGENT: Xxxxxxx & Xxxxxx, Esqs.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No. (000) 000-0000
Telephone No.: (000) 000-0000
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
Company's and the Buyer's representations and warranties herein shall survive
the execution and delivery of this Agreement and the delivery of the Preferred
Stock and the Purchase Price, and shall inure to the benefit of the Buyer and
the Company and their respective successors and assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, this Agreement has been duly executed by
the Buyer or one of its officers thereunto duly authorized as of the date set
forth below.
NUMBER OF SHARES OF PREFERRED STOCK TO BE PURCHASED:
AGGREGATE PURCHASE PRICE OF SUCH PREFERRED STOCK: $
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this ________ day of
___________________, 1997.
---------------------------------- -----------------------------------
Address Printed Name of Subscriber
----------------------------------
By:
--------------------------------
Telecopier No. (Signature of Authorized Person)
--------------------
-----------------------------------
Printed Name and Title
----------------------------------
Jurisdiction of Incorporation
or Organization
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
HOMECOM COMMUNICATIONS, INC.
By:
------------------------------
Title:
------------------------------
Date:
------------------------------
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ANNEX I AMENDMENT TO/EXCERPT FROM CERTIFICATE OF
INCORPORATION or CERTIFICATE OF DESIGNATIONS
ANNEX II JOINT ESCROW INSTRUCTIONS
ANNEX III OPINION OF COUNSEL
ANNEX IV REGISTRATION RIGHTS AGREEMENT
ANNEX V COMPANY DISCLOSURE MATERIALS
ANNEX VI FORM OF WARRANT
ANNEX VII FORM OF INVESTOR QUESTIONNAIRE
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ANNEX V
TO
SECURITIES PURCHASE AGREEMENT
COMPANY DISCLOSURE
[TO BE SUPPLIED]
