EXHIBIT 10.1
***** Confidential Treatment has been requested for portions of this agreement.
The copy file herein omits information subject to the confidentiality request.
Omissions are designated as [*****]. A complete version of this agreement has
been filed separately with the Securities and Exchange Commission.
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of January
26, 2000, by and among eGlobe, Inc., a Delaware corporation, with headquarters
located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("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 P Convertible Preferred Stock (the "Series P 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 Fifteen Thousand (15,000) shares of Series P Preferred
Stock (together with any shares of Series P 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 P 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", to purchase an aggregate of Three
Hundred Seventy-Five Thousand (375,000) shares of Common Stock (the "Warrants");
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 Fifteen Thousand (15,000) Preferred Shares and (ii) the Warrants,
for an aggregate purchase price of Fifteen Million Dollars ($15,000,000);
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 the
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 as is set forth immediately below such Buyer's
name on the signature pages hereto.
b. Form of Payment. On the Closing Date (as defined
below), (i) each Buyer shall pay the Purchase Price for the Preferred Shares and
Warrants to be issued and sold to it at the Closing (as defined below) (the
"Purchase Price") 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 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 and Warrants
pursuant to this Agreement (the "Closing Date") shall be 12:00 noon Eastern
Standard Time on January 26, 2000 or such other mutually agreed upon time. The
closing of the transactions contemplated by this Agreement (the "Closing") shall
occur on the Closing Date at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇,
LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other
location as may be agreed to by the parties.
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 ▇▇▇▇ ▇▇▇) 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.
a. Capitalization. The authorized capital stock of
the Company consists of: (a) one hundred million (100,000,000) shares of Common
Stock of which thirty-five million eight hundred three thousand two hundred
eighteen (35,803,218) shares were issued and outstanding as of January 26, 2000;
and (b) ten million (10,000,000) shares of preferred stock, par value $.001 per
share, of which, as of January 26, 2000: (i) one hundred twenty-five (125)
shares of 8% Series D Cumulative Convertible Preferred Stock are authorized,
none of which are outstanding; (ii) one hundred twenty-five (125) shares of 8%
Series E Cumulative Convertible Redeemable Preferred Stock are authorized, of
which fifty (50) shares are issued and outstanding; (iii) two million twenty
thousand (2,020,000) shares of Series F Convertible Preferred Stock are
authorized, none of which are outstanding; (iv) five hundred thousand (500,000)
shares of Series H Convertible Preferred Stock are authorized, issued and
outstanding; (v) four hundred thousand (400,000) shares of Series I Convertible
Preferred Stock are authorized, issued and outstanding; (vi) forty (40) shares
of 5% Series J Cumulative Convertible Preferred Stock are authorized, issued and
outstanding; (vii) thirty (30) shares of 5% Series K Cumulative Convertible
Preferred Stock are authorized, issued and outstanding; (viii) one (1) share of
20% Series M Cumulative Convertible Preferred Stock is authorized, issued and
outstanding; (ix) twenty thousand (20,000) shares of 8% Series N Cumulative
Convertible Preferred Stock are authorized, none of which are outstanding; and
(x) sixteen thousand one hundred (16,100) shares of 10% Series O Cumulative
Convertible Preferred Stock are authorized, issued and outstanding. In addition,
(i) 3,250,000 shares are reserved for issuance pursuant to Company stock
options, (ii) 32,317,113 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 21,346,646 shares issuable upon conversion of shares of preferred stock
(excluding the Preferred Shares), 7,553,800 shares issuable upon exercise of
non-contingent warrants and 3,416,667 shares issuable upon exercise of
contingent warrants) and (iii) 6,000,000 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 Closing Date.
b. 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.
c. 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.
d. 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.
e. 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.
f. 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.
g. 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.
h. 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.
i. 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.
j. 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.
k. 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.
l. 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.
m. 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).
n. 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.
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 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.
p. No Brokers. The Company has taken no action which
would give rise to any claim by any person (except for ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
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 ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co., Inc. pursuant to which such firm will be entitled to
payment relating to the transactions contemplated by this Agreement.
q. 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.
r. 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.
s. 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.
t. 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.
u. 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.
v. 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.
w. 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.
x. 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.
y. 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 ▇▇▇▇ ▇▇▇. 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, 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.
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.
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).
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential Treatment has been
requested with respect to the omitted portions
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 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 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 ▇▇▇▇ ▇▇▇); (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; or (iii) the sale by the Company of up to Fifteen Million Dollars
($15,000,000) of Common Stock to entities controlled by or affiliated with
[*****] (collectively, the "[*****] Entities"), provided that such sale
referenced in this clause (iii) is consummated in a private placement closing
simultaneous with or within thirty (30) days after the Closing at a price per
share of not less than eighty percent (80%) of the market price of the Common
Stock on the date of issuance, provided, further, that the Company shall not be
permitted to file a registration statement with respect to the resale of such
Common Stock by the purchaser referenced in this clause (iii) thereof for at
least one hundred eighty (180) days after the date on which the Registration
Statement required to be filed pursuant to the Registration Rights Agreement has
been declared effective (plus any days in which sales cannot be made
thereunder). 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. Notwithstanding
anything to the contrary in the Section 4(e), the [*****] Entities shall have
the right to participate in the Future Financing, on a pro rata basis based upon
the amount of securities purchased by the [*****] Entities in the transaction
referenced in clause (iii) above, provided that, in the event that the [***]
Entities choose not to exercise their right to participate in the Future
Financing, then the Buyers shall have the right to provide the remaining portion
of the Future Financing not provided by the [*****] Entities.
f. Expenses. The Company shall reimburse ▇▇▇▇ ▇▇▇▇
Capital Management, L.P. ("▇▇▇▇ ▇▇▇▇") 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 Twenty-Five
Thousand Dollars ($25,000), of which Two Thousand Five Hundred Dollars ($2,500)
was advanced previously.
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 so
reserved for issuance at no less than 6,000,000 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 (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 the 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 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.
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 the Closing is subject to the satisfaction, at or before
the Closing Date, 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. The applicable Buyer shall have executed this
Agreement and the Registration Rights Agreement and delivered the same to the
Company.
b. The applicable Buyer shall have delivered the
applicable Purchase Price in accordance with Section 1(b) above.
c. The Certificate of Designation shall have been
accepted for filing with the Secretary of State of the State of Delaware.
d. 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 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 Closing Date.
e. 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 the Closing is subject to the satisfaction, at or before the Closing
Date, 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. The Company shall have executed this Agreement and
the Registration Rights Agreement and delivered the same to the Buyer.
b. 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 the
Closing in accordance with Section 1(b) above.
c. 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.
d. 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.
e. The representations and warranties of the Company
shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at 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 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 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.
f. 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.
g. 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.
h. The Buyer shall have received an opinion of the
Company's counsel, dated as of the Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer and in substantially the same form as
Exhibit "D" attached hereto.
i. The Buyer shall have received an officer's
certificate described in Section 3(c) above, dated as of the Closing Date.
j. 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.
k. The Company's Series ▇, ▇, ▇, ▇, ▇, ▇ 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, H,
I, J, K, L, M and O preferred stock.
l. 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.
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.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chairman of the Board and Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P
Columbia Square
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to a Buyer: To the address set forth immediately below such
Buyer's name on the signature pages hereto.
With copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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) after the Maximum Share Amount (as defined in the
Certificate of Designation) has been issued, 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 closing 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:
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▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chairman of the Board and Chief Executive Officer
RGC INTERNATIONAL INVESTORS, LDC
By: ▇▇▇▇ ▇▇▇▇ Capital Management, L.P.,
Investment Manager
By: RGC General Partner Corp.,
as General Partner
By:
-------------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
Managing Director
RESIDENCE: Cayman Islands
ADDRESS:
c/o ▇▇▇▇ ▇▇▇▇ Capital Management, L.P.
▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇. ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
AGGREGATE SUBSCRIPTION AMOUNT:
Number of Preferred Shares: 15,000
Number of Warrants: 375,000
Aggregate Purchase Price: $15,000,000
