EXHIBIT 10.31.4
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (this "Agreement") made as of this
27th day of March, 2003, by and between XXXXXXXX LLC, an entity organized and
existing under the laws of the Cayman Islands ("XXXXXXXX") and EUROTECH, LTD., a
District of Columbia corporation ("EUROTECH" or the "COMPANY"), and
When used in this Agreement, the following terms shall have
the specified definitions, unless the context otherwise requires:
"SERIES G STOCK" shall mean the Series G Preferred Stock of
Homecom Communications, Inc. ("HOMECOM"), $.0001 par value.
"COMMON STOCK" shall mean the Common Stock of Eurotech, $
..00025 par value.
R E C I T A L S
X. Xxxxxxxx is the owner and holder of the right to have
issued to it 10,000,000 shares of Common Stock, free and clear of all liens and
encumbrances (the "Exchanged Stock").
C. Eurotech wishes to acquire the Exchanged Stock from
Xxxxxxxx for the purpose of retiring such shares, in exchange for 1,069 shares
of the Series G Stock, and Xxxxxxxx and Eurotech desire to effect such exchange
(such transaction, the "EXCHANGE"), in each case on the terms set forth herein.
NOW, THEREFORE, for and in consideration of the premises and
the mutual agreement contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. EXCHANGE. In consideration of the mutual benefits to be
gained by the parties hereto pursuant to the Exchange, at the Closing (as
defined below), Xxxxxxxx agrees to exchange with Eurotech, and Eurotech agrees
to exchange with Xxxxxxxx, respectively, the Exchanged Stock for the Series G
Stock.
2. CLOSING DATE. Subject to the satisfaction (or waiver) of
the conditions thereto set forth in Section 7 and Section 8 below, the date of
the closing of the Exchange pursuant to this Agreement (the "CLOSING DATE")
shall be on April 15, 2003 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 Xxxxxxx & Prager, 00 Xxxxxxxx, Xxxxx 0000,
Xxx Xxxx, Xxx Xxxx or at such other location as may be agreed to by the parties.
3. MUTUAL DELIVERIES. Upon the delivery by Xxxxxxxx of the
release and surrender of its rights to receive the Exchange Stock, Eurotech
shall deliver to Xxxxxxxx the Series G Stock, registered in the name of Xxxxxxxx
or its designee, bearing substantially the following legend:
THE SECURITIES REPRESENTED HEREBY (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.
4. REPRESENTATIONS AND WARRANTIES OF EUROTECH. EUROTECH
represents and warrants to Xxxxxxxx that:
(a) The Company has the corporate power and authority to enter
into this
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Agreement, and to perform its obligations hereunder. The execution and delivery
by the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement has been duly
executed and delivered by the Company and constitute a valid and binding
obligations of the Company enforceable against it in accordance with its terms,
subject to the effects of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and to the
application of equitable principles in any proceeding (legal or equitable).
(b) There is no pending, or to the knowledge of the Company,
threatened, judicial, administrative or arbitral action, claim, suit, proceeding
or investigation which might affect the validity or enforceability of this
Agreement or which involves the Company and which if adversely determined, could
reasonably be expected to have a material adverse effect on the Company.
(c) Except for filings required by any applicable securities
laws, no consent or approval of, or exemption by, or filing with, any party or
governmental or public body or authority is required in connection with the
execution, delivery and performance of the Company under this Agreement or the
taking of any action contemplated hereunder.
(d) The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby, will not (i) conflict with or result in a violation of any
provision of its certificate of incorporation, bylaws or other organizational
documents, 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, modification
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or cancellation of, any contract, agreement, note, bond, indenture or other
instrument to which the Company is a party or under which the Company, its
assets or its capital stock is or may be effected, 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) applicable to the Company or by which any
property of the Company, including, without limitation, the Series G Stock, will
be bound or affected. Except as specifically contemplated by this Agreement and
as required under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
and any applicable federal and state securities laws, Eurotech 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 in
accordance with the terms hereof. Except for filings that may be required under
applicable federal and state securities laws, 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.
(e) Eurotech is the owner of good and marketable title to the
shares of Series G Stock held by it , free and clear of all liens, pledges,
encumbrances or other stop transfer orders (except as may be required by the
applicable securities laws).
(f) Annexed hereto as Exhibit A is a true and complete copy of
the Certificate of Designations of the Series G Stock as filed with the
Secretary of State of the State of Delaware on or prior to the Closing Date.
5. REPRESENTATIONS AND WARRANTIES OF XXXXXXXX. Xxxxxxxx hereby
represents and warrants to the Company that:
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(a) Xxxxxxxx has the corporate power and authority to enter
into this Agreement and to perform its obligations hereunder. The execution and
delivery by Xxxxxxxx of this Agreement, and the consummation by Xxxxxxxx of the
transactions contemplated hereby, have been duly authorized by all necessary
corporate action on the part of the Xxxxxxxx. This Agreement has been duly
executed and delivered by Xxxxxxxx and constitute valid and binding obligations
of Xxxxxxxx, enforceable against it in accordance with their respective terms,
subject to the effects of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and to the
application of equitable principles in any proceeding (legal or equitable).
(b) There is no pending, or to the knowledge of Xxxxxxxx,
threatened, judicial, administrative or arbitral action, claim, suit, proceeding
or investigation which might affect the validity or enforceability of this
Agreement or which involves Xxxxxxxx, and which if adversely determined, could
reasonably be expected to have a material adverse effect on Xxxxxxxx.
(c) No consent or approval of, or exemption by, or filing
with, any party or governmental or public body or authority is required in
connection with the execution, delivery and performance by Xxxxxxxx under this
Agreement or the taking of any action contemplated hereunder.
(d) The execution, delivery and performance of this Agreement
by Xxxxxxxx and the consummation by Xxxxxxxx of the transactions contemplated
hereby, will not (i) conflict with or result in a violation of any provision of
its certificate of incorporation, bylaws or other organizational documents, 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
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default) under, or give to others any rights of termination, amendment,
acceleration, modification or cancellation of, any contract, agreement, note,
bond, indenture or other instrument to which Xxxxxxxx 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) applicable to Xxxxxxxx or by which any
property of Xxxxxxxx are bound or affected. Except as specifically contemplated
by this Agreement and as required under the Securities Act and any applicable
federal and state securities laws, Xxxxxxxx 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 in accordance with the terms hereof.
Except for filings that may be required under applicable federal and state
securities laws in connection with the exchange of the Exchanged Stock, all
consents, authorizations, orders, filings and registrations which Xxxxxxxx is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof.
(e) Xxxxxxxx is a sophisticated investor (as described in Rule
506(b)(2)(ii) of Regulation D) and an accredited investor (as defined in Rule
501 of Regulation D), and Xxxxxxxx has such experience in business and financial
matters that it is capable of evaluating the merits and risks of an investment
in the Series G Stock. Xxxxxxxx acknowledges that an investment in the Series G
Stock is speculative and involves a high degree of risk.
(f) Xxxxxxxx has received all documents, records, books and
other information pertaining to Xxxxxxxx'x acquisition of the Series G Stock
pursuant to the Exchange that have been requested by Xxxxxxxx.
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(g) Eurotech has made available to Xxxxxxxx, through
electronic filings on XXXXX, each registration statement, report, proxy
statement or information statement prepared by Homecom since December 31, 2001,
including its Annual Report on Form 10-KSB for the years ended December 31, 2001
and its Quarterly Reports on Form 10-QSB for the quarters ended since March 29,
2002, in the form (including exhibits, annexes and any amendments thereto) filed
with the Securities and Exchange Commission ("SEC") subsequent to the Agreement
Date, its "REPORTS").
(h) Xxxxxxxx understands that (i) the sale or resale of the
shares of Series G Stock has not been and is not being registered under the
Securities Act or any applicable state securities laws, and the Series G Stock
may not be transferred unless (a) the Series G Stock are sold pursuant to an
effective registration statement under the Securities Act, (b) the Series G
Stock are sold or transferred pursuant to an exemption from such registration,
(c) the Series G Stock are sold or transferred to an "affiliate" (as defined in
Rule 144 promulgated under the Securities Act (or a successor rule) ("RULE
144")) who agrees to sell or otherwise transfer the Series G Stock only in
accordance with this section and who is an "accredited investor" (as defined
under the Securities Act"), or (d) the shares of Series G Stock are sold
pursuant to Rule 144, if such rule is available; (ii) any sale of such shares of
Series G Stock 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 resale
of such shares of Series G Stock 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 Securities Act) may require compliance with some
other exemption under the Securities Act or the rules and regulations of the SEC
thereunder; and (iii) neither the Company nor any other person is under any
obligation
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to comply with the terms and conditions of any exemption under the Securities
Act. As used in this paragraph (g), Series G Stock includes the shares of Common
Stock issuable upon conversion of the Series G Stock.
(i) Xxxxxxxx is the owner of good and marketable title to the
Exchanged Stock, free and clear of all liens, pledges, and encumbrances.
6. Nothing contained herein shall in any way otherwise limit
Xxxxxxxx'x right to sell or transfer the common stock of HomeCom to be delivered
to Xxxxxxxx upon conversion of the Series G Stock.
7. CONDITIONS TO EUROTECH'S OBLIGATIONS. The obligations of
the Company hereunder to exchange and deliver the certificate(s) representing
the Homecom Series G Stock to Xxxxxxxx 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 Eurotech's sole benefit and may
be waived by Eurotech at any time in its sole discretion:
(a) Xxxxxxxx shall have executed this Agreement and delivered
same to Eurotech.
(b) Xxxxxxxx shall have delivered the a release of its rights
to receive the Exchanged Stock in accordance with Section 3 above.
(c) The representations and warranties of Xxxxxxxx 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), and Xxxxxxxx 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 Xxxxxxxx
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at or prior to the Closing Date.
(d) 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.
8. CONDITIONS TO XXXXXXXX'X OBLIGATIONS. The obligations of
Xxxxxxxx hereunder to exchange and deliver the certificate(s) representing the
Exchanged Stock to Eurotech 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 Xxxxxxxx'x sole benefit and may be waived by Xxxxxxxx at any
time in its sole discretion.
(a) Eurotech shall have executed this Agreement and delivered
the same to Xxxxxxxx.
(b) Eurotech shall have delivered to Xxxxxxxx duly executed
certificate(s) representing the Series G Stock in accordance with Section 3
above.
(c) The representations and warranties of Eurotech 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) and Eurotech 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 Eurotech at or prior to the Closing Date.
(d) No litigation, statute, rule, regulation, executive order,
decree, ruling or
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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.
9. GOVERNING LAW; MISCELLANEOUS
(a) Governing Law; Jurisdiction. THIS AGREEMENT SHALL BE
ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITH SUCH
STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO
HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS
LOCATED IN THE CITY OF NEW YORK, NEW YORK WITH RESPECT TO ANY DISPUTE ARISING
UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING.
BOTH 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 ANY
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
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SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE PARTIES HEREBY WAIVE A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES
HERETO AGAINST THE OTHER IN RESPECT OF ANY MATTER ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT.
(b) Jury Trial Waiver. The parties hereby waive a trial by
jury in any action, proceeding or counterclaim brought by either of the parties
hereto against the other in respect of any matter arising out of or in
connection with the Transaction Documents.
(c) Counterparts. This Agreement may be executed in one or
more counterparts and by facsimile transmission, each of which shall be deemed
an original but all of which shall constitute 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 party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
(d) Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(e) 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.
(f) 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
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Purchaser make any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived other than
by an instrument in writing signed by the party to be charged with enforcement
and no provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and the Purchaser.
(g) 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, overnight
delivery service or by confirmed facsimile transmission, and shall be effective
five days after being placed in the mail, if mailed, or upon receipt or refusal
of receipt, if delivered personally or by courier, overnight delivery service or
confirmed telecopy, in each case addressed to a party. The addresses for such
communications shall be:
If to the Company:
Eurotech, Ltd.
00000 Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxx Xxxxxxxxx, President
Fax: 000-000-0000
with a copy (which shall not constitute notice) to:
Ellenoff, Xxxxxxxx Schole & Cyruli, LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx
Telecopier No.: 000-000-0000
If to Xxxxxxxx:
Xxxxxxxx LLC
X.X. Xxx 000, Xxxxxx Xxxx
Xxxxxxxx Square Building
Grand Cayman, Cayman Islands
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Attention: Director
Facsimile No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxxx & Xxxxxx, LLP
00 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
Each party shall provide notice to the other parties of any
change in address.
(h) 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 Purchaser shall assign this Agreement or any rights
or obligations hereunder without the prior written consent of the other.
(i) 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.
(j) 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.
(k) Termination by Mutual Consent. This Agreement may be
terminated and the Exchange may be abandoned at any time prior to the Closing
Date by mutual written consent of Eurotech and the Company, through action of
their respective Boards of Directors.
11. Fees. Each party hereto agrees to assume their respective
legal fees and other expenses incurred by them in connection with the
negotiation, preparation, execution and
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implementation of this Agreement.
12. Publicity. The initial press release with respect to the
Exchange shall be a joint, mutually agreed press release. Thereafter, Eurotech
and the Company shall consult with each other prior to issuing any press
releases or otherwise making public announcements with respect to the Exchange
and prior to making any filings with any third party and/or any governmental
entity (including any securities exchange) with respect thereto, except as may
be required by Law or by obligations pursuant to any listing agreement with or
rules of any securities exchange.
13. Further Assurances. Each party shall do and perform or
cause to be done and perform, 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.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
EUROTECH LTD.
By: /s/ Xxx X. Xxxxxxxxx
---------------------------------
Name: DonV. Hahnfeldt
Title: President
XXXXXXXX LLC
By: /s/ Xxxxx Xxxx
---------------------------------
Name: Xxxxx Xxxx, for Navigator
Management, Ltd.
Title: Director
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EXHIBIT A
FORM OF CERTIFICATE OF DESIGNATIONS OF
SERIES G PREFERRED STOCK
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF
SERIES G CONVERTIBLE PREFERRED STOCK
OF
HOMECOM COMMUNICATIONS, INC.
HomeCom Communications, Inc. (the "Company"), a corporation organized
and existing under the General Corporation Law of the State of Delaware, does
hereby certify that, pursuant to authority conferred upon the Board of Directors
of the Company by the Certificate of Incorporation of the Company, and pursuant
to Section 151 of the General Corporation Law of the State of Delaware, the
Board of Directors of the Company at a meeting duly held, adopted resolutions
(i) authorizing a series of the Company's authorized preferred stock, $.01 par
value per share, and (ii) providing for the designations, preferences and
relative, participating, optional or other rights, and the qualifications,
limitations or restrictions thereof, of 1,069 shares of Series G Convertible
Preferred Stock of the Company, as follows:
RESOLVED, that the Company is authorized to issue 1,069 shares of
Series G Convertible Preferred Stock (the "Series G Preferred Shares"), $.01 par
value per share, which shall have the following powers, designations,
preferences and other special rights:
(1) DIVIDENDS. The Series G Preferred Shares shall not bear any
dividends except as provided herein.
(2) HOLDER'S CONVERSION OF SERIES G PREFERRED SHARES. A holder of
Series G Preferred Shares shall have the right, at such holder's option, to
convert the Series G Preferred Shares into shares of the Company's common stock,
$.0001 par value per share (the "Common Stock"), on the following terms and
conditions:
(a) CONVERSION RIGHT. Subject to the provisions of Section
3(a) below, at any time or times upon the earlier to occur of (i) a date on or
after 120 days after the Issuance Date (as defined herein) or (ii) the date that
the U.S. Securities & Exchange Commission declares the Company's Registration
Statement with respect to the Series G Preferred Shares (the "Effective Date"),
any holder of Series G Preferred Shares shall be entitled to convert any Series
G Preferred Shares into fully paid and nonassessable shares (rounded to the
nearest whole share in accordance with Section 2(h) below) of Common Stock, at
the Conversion Rate (as defined below); PROVIDED, HOWEVER, that in no event
other than upon a Mandatory Conversion pursuant to Section 2(f) hereof, shall
any holder be entitled to convert Series G Preferred Shares in excess of that
number of Series G Preferred Shares which, upon giving effect to such
conversion, would cause the aggregate number of shares of Common Stock
beneficially owned by the holder and its affiliates to exceed 9.9% of the
outstanding shares of the Common Stock following such conversion. For purposes
of the foregoing proviso, the aggregate number of shares of Common Stock
beneficially owned by the holder and its affiliates shall include the number of
shares of Common Stock issuable upon conversion of the Series G Preferred Shares
with respect to which the determination of such proviso is being made, but shall
exclude the number of shares of Common Stock which would be issuable upon
conversion of the remaining, nonconverted Series G Preferred Shares beneficially
owned by the holder and its affiliates. Except as set forth in the preceding
sentence, for purposes of this paragraph, beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended.
(b) CONVERSION RATE. The number of shares of Common Stock
issuable upon conversion of each of the Series G Preferred Shares pursuant to
Section (2)(a) shall be determined according to the following formula (the
"Conversion Rate");
LIQUIDATION VALUE
---------------------------------------------------
CONVERSION PRICE
For purposes of this Certificate of Designations, the following terms shall have
the following meanings:
(i) "CONVERSION PRICE" means, as of any Conversion Date (as defined
below), the, the amount obtained by multiplying the Conversion Percentage by the
Average Market Price for the Common Stock for the five (5) Trading Days
immediately preceding such date;
(ii) "CONVERSION PERCENTAGE" means 82.5%;
(iii) "AVERAGE MARKET PRICE" means, with respect to any security for
any period, that price which shall be computed as the arithmetic average of the
Closing Bid Prices (as defined below) for such security for each trading day in
such period;
(iv) "CLOSING BID PRICE" means, for any security as of any date, the
last closing bid price on the Nasdaq SmallCap Market(TM) (the "Nasdaq-SM") as
reported by Bloomberg Financial Markets ("Bloomberg"), or, if the Nasdaq-SM is
not the principal trading market for such security, the last closing bid price
of such security on the principal securities exchange or trading market where
such security is listed or traded as reported by Bloomberg (the "Trading
Market"), or if the foregoing do not apply, the last closing bid price of such
security in the over-the-counter market on the pink sheets or bulletin board for
such security as reported by Bloomberg, or, if no closing bid
price is reported for such security by Bloomberg, the last closing trade price
of such security as reported by Bloomberg. If the Closing Bid Price cannot be
calculated for such security on such date on any of the foregoing bases, the
Closing Bid Price of such security on such date shall be the fair market value
as reasonably determined in good faith by the Board of Directors of the Company
(all as appropriately adjusted for any stock dividend, stock split or other
similar transaction during such period);
(v) "TRADING DAY" means any day on which the Company's Common Stock is
traded on the Principal Trading Market.
(c) ADJUSTMENT TO CONVERSION PRICE - DILUTION AND OTHER
EVENTS. In order to retain the rights granted under this Certificate of
Designations, the Conversion Price will be subject to adjustment from time to
time as provided in this Section 2(c).
(i) ADJUSTMENT OF FIXED CONVERSION PRICE UPON SUBDIVISION
OR COMBINATION OF COMMON STOCK. If the Company at any
time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of
its outstanding shares of Common Stock into a greater
number of shares, the Fixed Conversion Price in
effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time
combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding
shares of Common Stock into a smaller number of
shares, the Fixed Conversion Price in effect
immediately prior to such combination will be
proportionately increased.
(ii) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION,
MERGER, OR SALE. Any recapitalization reorganization,
reclassification, consolidation, merger, sale of all
or substantially all of the Company's assets to
another Person (as defined below) o other similar
transaction which is effected in such a way that
holders of Common Stock are entitled to receive
(either directly or upon subsequent liquidation)
stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as in
"Organic Change." Prior to the consummation of any
Organic Change, th Company will make appropriate
provisio to insure that each of the holders of the
Series G Preferred Shares will thereafter have the
right to acquire and receive in lieu of or in
addition to (as the case may be) the shares of Common
Stock immediately theretofore acquirable and
receivable upon the conversion of such holder's
Series G Preferred Shares, such shares of stock
securities or assets as may be issued or payable with
respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and
receivable upon the conversion of such holder's
Series G
Preferred Shares had such Organic Change not taken
place. In any such case, the Company will make
appropriate provision (in form and substance
satisfactory to the holders of a majority of the
Series G Preferred Shares then outstanding) with
respect to such holders' rights and interests to
insur that the provisions of this Section 2(b) will
thereafter be applicable to the Series G Preferred
Shares. The Company will not effect any such
consolidation, merger or sale, unless prior to the
consummation thereof the successor entity (if other
than the Company) resulting from consolidation or
merger or the entity purchasing such assets assumes,
by written instrument (in form and substance
satisfactory to the holders of a majority of the
Series G Preferre Shares then outstanding), the
obligation to deliver to each holder o Series G
Preferred Shares such shares of stock, securities or
assets as, in accordance with the foregoing
provisions, such holder may be entitled to acquire.
Fo purposes of this Agreement, "PERSON" shall mean an
individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust,
an unincorporated organization and a government or
any department or agency thereof.
(iii) SPIN OFF. If, at any time prior to a Conversion Date,
the Company consummates a spin off or otherwise
divests itself of a part of its business or
operations or disposes of all or of a part of its
assets in a transaction (the "Spin Off") in which the
Company does not receive just compensation for such
business, operations or assets, but causes securities
of another entity (the "Spin Off Securities") to be
issued to security holders of the Company, then the
Company shall cause (i) to be reserved Spin Off
Securities equal to the number thereof which would
have been issued to the Holder had all of the
holder's Series G Preferred Shares outstanding on the
record date (the "Record Date") for determining the
amount and number of Spin Off Securities to be issued
to security holders of the Company been converted as
of the close of business on the trading day
immediately before the Record Date (the "Reserved
Spin Off Shares"), and (ii) to be issued to the
Holder on the conversion of all or any of the
outstanding Series G Preferred Shares, such amount of
the Reserved Spin Off Shares equal to (x) the
Reserved Spin Off Shares multiplied by (y) a
fraction, of which (a) the numerator is the principal
amount of the outstanding Series G Preferred Shares
then being converted, and (b) the denominator is the
principal amount of all the outstanding Series G
Preferred Shares.
(iv) NOTICES.
(A) Immediately upon any adjustment of the
Conversion Rate, the Company will give
written notice thereof to each holder of
Series G Preferred Shares, setting forth in
reasonable detail and certifying the
calculation of such adjustment.
(B) The Company will give written notice to each
holder of Series G Preferred Shares at least
twenty (20) days prior to the date on which
the Company closes its books or takes a
record (I) with respect to any dividend or
distribution upon the Common Stock, (II)
with respect to any pro rata subscription
offer to holders of Common Stock or (III)
for determining rights to vote with respect
to any Organic Change, dissolution or
liquidation.
(C) The Company will also give written notice to
each holder of Series G Preferred Shares at
least twenty (20) days prior to the date on
which any Organic Change (as defined below),
dissolution or liquidation will take place.
(d) MECHANICS OF CONVERSION. Subject to the Company's ability to fully
satisfy its obligations under a Conversion Notice (as defined below) as provided
for in Section 5 below:
(i) HOLDER'S DELIVERY REQUIREMENTS. To convert Series G Preferred
Shares into full shares of Common Stock on any date (the
"Conversion Date"), the holder thereof shall (A) deliver or
transmit by facsimile, for receipt on or prior to 11:59 p.m.,
Eastern Standard Time, on such date, a copy of a fully
executed notice of conversion in the form attached hereto as
Exhibit I (the "Conversion Notice") to the Company or its
designated transfer agent (the "Transfer Agent"), and (B)
surrender to a common carrier for delivery to the Company or
the Transfer Agent as soon as practicable following such date,
the original certificates representing the Series G Preferred
Shares being converted (or an indemnification undertaking with
respect to such shares in the e case of their loss, theft or
destruction) (the "Preferred Stock Certificates") and the
originally executed Conversion Notice.
(ii) COMPANY'S RESPONSE. Upon receipt by the Company of a facsimile
copy of a Conversion Notice, the Company shall immediately
send, via facsimile, a confirmation of receipt of such
Conversion Notice to such holder. Upon receipt by the Company
or the Transfer Agent of the Preferred Stock Certificates to
be converted pursuant to a Conversion Notice, together with
the originally executed Conversion Notice, the Company or the
Transfer Agent (as applicable) shall, within five (5) business
days following the date of receipt, (A) issue and surrender to
a common carrier for overnight delivery to the address as
specified in the Conversion Notice, a certificate, registered
in the name of the holder or its designee, for the number of
shares of Common Stock to which the holder shall be entitled
or (B) credit the aggregate number of shares of Common Stock
to which the holder shall be entitled to the holder's or its
designee's balance account at The Depository Trust Company.
(iii) RECORD HOLDER. The person or persons entitled to receive the
shares of Common Stock issuable upon a conversion of Series G
Preferred Shares shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on the
Conversion Date.
(e) NASDAQ LISTING. So long as the Common Stock is listed for trading
on NASDAQ or an exchange or quotation system with a rule substantially similar
to NASDAQ Rule 4460(i) then, notwithstanding anything to the contrary contained
herein if, at any time, the aggregate number of shares of Common Stock then
issued upon conversion of the Series G Preferred Shares (including any shares of
capital stock or rights to acquire shares of capital stock issued by the
Corporation which are aggregated or integrated with the Common Stock issued or
issuable upon conversion of the Series G Preferred Shares for purposes of such
rule) equals 19.99% of the "Outstanding Common Amount" (as hereinafter defined),
the Series G Preferred Shares shall, from that time forward, cease to be
convertible into Common Stock in accordance with the terms hereof, unless the
Corporation (i) has obtained approval of the issuance of the Common Stock upon
conversion of the Series G Preferred Shares by a majority of the total votes
cast on such proposal, in person or by proxy, by the holders of the
then-outstanding Common Stock (not including any shares of Common Stock held by
present or former holders of Series G Preferred Shares that were issued upon
conversion of Series G Preferred Shares (the "Stockholder Approval"), or (ii)
shall have otherwise obtained permission to allow such issuances from NASDAQ in
accordance with NASDAQ Rule 4460(i). If the Corporation's Common Stock is not
then listed on NASDAQ or an exchange or quotation system that has a rule
substantially similar to Rule 4460(i) then the limitations set forth herein
shall be inapplicable and of no force and effect. For purposes of this
paragraph, "Outstanding Common Amount" means (i) the number of shares of the
Common Stock outstanding on the date of issuance of the Series G Preferred
Shares pursuant to the Purchase Agreement plus (ii) any additional shares of
Common Stock issued thereafter in respect of such shares pursuant to a stock
dividend, stock split or similar event. The maximum number of shares of Common
Stock issuable as a result of the 19.99% limitation set forth herein is
hereinafter referred to as the "Maximum Share Amount." With respect to each
holder of Series G Preferred Stock, the Maximum Share Amount shall refer to such
holder's pro rata share thereof. In the event that Corporation obtains
Stockholder Approval or the approval of NASDAQ, or by reason of the
inapplicability of
the rules of NASDAQ or otherwise, the Corporation concludes that it is able to
increase the number of shares to be issued above the Maximum Share Amount (such
increased number being the "New Maximum Share Amount"), the references to
Maximum Share Amount, above, shall be deemed to be, instead, references to the
greater New Maximum Share Amount. In the event that Stockholder Approval is
obtained and there are insufficient reserved or authorized shares, or a
registration statement covering the additional shares of Common Stock which
constitute the New Maximum Share Amount is not effective prior to the Maximum
Share Amount being issued (if such registration statement is necessary to allow
for the public resale of such securities), the Maximum Share Amount shall remain
unchanged; provided, however, that the holders of Series G Preferred Shares may
grant an extension to obtain a sufficient reserved or authorized amount of
shares or of the effective date of such registration statement. In the event
that (a) the aggregate number of shares of Common Stock actually issued upon
conversion of the outstanding Series G Preferred Shares represents at least
twenty percent (20%) of the Maximum Share Amount and (b) the sum of (x) the
aggregate number of shares of Common Stock issued upon conversion of Series G
Preferred Shares plus (y) the aggregate number of shares of Common Stock that
remain issuable upon conversion of Series G Preferred Shares and based on the
Conversion Price then in effect), represents at least one hundred percent (100%)
of the Maximum Share Amount, the Corporation will use its best reasonable
efforts to seek and obtain Stockholder Approval (or obtain such other relief as
will allow conversions hereunder in excess of the Maximum Share Amount) as soon
as practicable following the Triggering Event and before the Mandatory
Redemption Date.
(f) FRACTIONAL SHARES. The Company shall not issue any fraction of a
share of Common Stock upon any conversion. All shares of Common Stock (including
fractions thereof) issuable upon conversion of more than one share of the Series
G Preferred Shares by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of a fraction of
a share of Common Stock. lf, after the aforementioned aggregation, the issuance
would result in the issuance of a fraction of a share of Common Stock, the
Company shall round such fraction of a share of Common Stock up or down to the
nearest whole share.
(g) TAXES. The Company shall pay any and all taxes which may be imposed
upon it with respect to the issuance and delivery of Common Stock upon the
conversion of the Series G Preferred Shares.
(3) REISSUANCE OF CERTIFICATES. In the event of a conversion or
redemption pursuant to this Certificate of Designations of less than all of the
Series G Preferred Shares represented by a particular Preferred Stock
Certificate, the Company shall promptly cause to be issued and delivered to the
holder of such Series G Preferred Shares a Preferred Stock Certificate
representing the remaining Series G Preferred Shares which have not been so
converted or redeemed.
(4) RESERVATION OF SHARES. During the Conversion Period, the Company
shall, so long as any of the Series G Preferred Shares are outstanding, reserve
and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Series G Preferred Shares, such number of shares of Common
Stock as shall from time to time be sufficient to affect the conversion of all
of the Series G Preferred Shares then outstanding; provided that the number of
shares of Common Stock so reserved shall at no time be less than 100% of the
number of shares of Common Stock for which the Series G Preferred Shares are at
any time convertible.
(5) VOTING RIGHTS. Holders of Series G Preferred Shares shall have no
voting rights, except as required by law, including but not limited to the
General Corporation Law of Delaware.
(6) LIQUIDATION, DISSOLUTION, WINDING-UP. In the event of any voluntary
or involuntary liquidation, dissolution, or winding up of the Company, the
holders of the Series G Preferred Shares shall be entitled to receive in cash
out of the assets of the Company, whether from capital or from earnings
available for distribution to its stockholders (the "Preferred Funds"), before
any amount shall be paid to the holders of any of the capital stock of the
Company of any class junior in rank to the Series G Preferred Shares (other than
the Series F Preferred Shares which shall be equal in rank) in respect of the
preferences as to the distributions and payments on the liquidation, dissolution
and winding up of the Company, an amount per Series G Preferred Share equal to
$1,000 (such sum being referred to as the "Liquidation Value"); provided that,
if the Preferred Funds are insufficient to pay the full amount due to the
holders of Series G Preferred Shares and holders of shares of other classes or
series of preferred stock of the Company that are of equal rank with the Series
G Preferred Shares as to payments of Preferred Funds (the "Pari Passu Shares"),
then each holder of Series G Preferred Shares and Pari Passu Shares shall
receive a percentage of the Preferred Funds equal to the full amount of
Preferred Funds payable to such holder as a liquidation preference, in
accordance with their respective Certificate of Designations, Preferences and
Rights, as a percentage of the full amount of Preferred Funds payable to all
holders of Series G Preferred Shares and Pari Passu Shares. The purchase or
redemption by the Company of stock of any class in any manner permitted by law,
shall not for the purposes hereof, be regarded as a liquidation, dissolution or
winding up of the Company. Neither the consolidation or merger of the Company
with or into any other Person, nor the sale or transfer by the Company of less
than substantially all of its assets, shall, for the purposes hereof, be deemed
to be a liquidation, dissolution or winding up of the Company. No holder of
Series G Preferred Shares shall be entitled to receive any amounts with respect
thereto upon any liquidation, dissolution or winding up of the Company other
than the amounts provided for herein.
(7) PREFERRED RATE. All shares of Common Stock shall be of junior rank
to all Series G Preferred Shares in respect to the preferences as to
distributions and payments upon the liquidation, dissolution, and winding up of
the Company. The rights of the Series G Preferred Shares shall be subject to the
Preferences and relative rights of the Series B Convertible Preferred Stock,
Series C Convertible Preferred Stock, Series D Convertible Preferred Stock,
Series E Convertible Preferred Stock, and Series F Convertible Preferred Stock.
Without the prior express written consent of the holders of not less than a
majority of the then outstanding Series G Preferred Shares, the
Company shall not hereafter authorize or issue additional or other capital stock
(other than the Series F Preferred Shares which shall be equal in rank) that is
of senior or equal rank to the Series G Preferred Shares in respect of the
preferences as to distributions and payments upon the liquidation, dissolution
and winding up of the Company. Without the prior express written consent of the
holders of not less than a majority of the then outstanding Series G Preferred
Shares, the Company shall not hereafter authorize or make any amendment to the
Company's Certificate of Incorporation or bylaws, or make any resolution of the
board of directors with the Delaware Secretary of State containing any
provisions, which would materially and adversely affect or otherwise impair the
rights or relative priority of the holders of the Series G Preferred Shares
relative to the holders of the Common Stock or the holders of any other class of
capital stock. In the event of the merger or consolidation of the Company with
or into another corporation, the Series G Preferred Shares shall maintain their
relative powers, designations, and preferences provided for herein and no merger
shall result inconsistent therewith.
(8) RESTRICTION ON DIVIDENDS. If any Series G Preferred Shares are
outstanding, without the prior express written consent of the holders of not
less than a majority of the then outstanding Series G Preferred Shares, the
Company shall not directly or indirectly declare, pay or make any dividends or
other distributions upon any of the Common Stock so long as written notice
thereof has not been given to holders of the Series G Preferred Shares at least
30 days prior to the earlier of (a) the record date taken for or (b) the payment
of any such dividend or other distribution. Notwithstanding the foregoing, this
Section 8 shall not prohibit the Company from declaring and paying a dividend in
cash with respect to the Common Stock so long as the Company: (i) pays
simultaneously to each holder of Series G Preferred Shares an amount in cash
equal to the amount such holder would have received had all of such holder's
Series G Preferred Shares been converted to Common Stock pursuant to Section 2
hereof one business day prior to the record date for any such dividend, and (ii)
after giving effect to the payment of any dividend and any other payments
required in connection therewith including to the holders of the Series G
Preferred Shares, the Company has in cash or cash equivalents an amount equal to
the aggregate of: (A) all of its liabilities reflected on its most recently
available balance sheet, (B) the amount of any indebtedness incurred by the
Company or any of its subsidiaries since its most recent balance sheet and (C)
120% of the amount payable to all holders of any shares of any class of
preferred stock of the Company assuming a liquidation of the Company as the date
of its most recently available balance sheet.
(9) VOTE TO CHANGE THE TERMS OF SERIES F PREFERRED SHARES. The
affirmative vote at a meeting duly called for such purpose, or the written
consent without a meeting of the holders of not less than 66-2/3% of the then
outstanding Series G Preferred Shares, shall be required for any change to this
Certificate of Designations or the Company's Certificate of Incorporation which
would amend, alter, change or repeal any of the powers, designations,
preferences and rights of the Series G Preferred Shares.
(10) LOST OR STOLEN CERTIFICATES. Upon receipt by the Company of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Preferred Stock
Certificates representing the Series G Preferred Shares, and, in the case of
loss, theft or destruction, of any indemnification undertaking by the holder to
the Company and, in the case of mutilation, upon surrender and cancellation of
the Preferred Stock Certificate(s), the Company shall execute and deliver new
preferred stock certificate(s) of like tenor and date; provided, however, the
Company shall not be obligated to re-issue preferred stock certificates if the
holder contemporaneously requests the Company to convert such Series G Preferred
Shares into Common Stock.
(11) WITHHOLDING TAX OBLIGATIONS. Notwithstanding anything herein to
the contrary, to the extent that the Company receives advice in writing from its
counsel that there is a reasonable basis to believe that the Company is required
by applicable federal laws or regulations and delivers a copy of such written
advice to the holders of the Series G Preferred Shares so effected, the Company
may reasonably condition the making of any distribution (as such term is defined
under applicable federal tax law and regulations) in respect of any Series G
Preferred Share on the holder of such Series G Preferred Shares depositing with
the Company an amount of cash sufficient to enable the Company to satisfy its
withholding tax obligations (the "Withholding Tax") with respect to such
distribution. Notwithstanding the foregoing or anything to the contrary, if any
holder of the Series G Preferred Shares so effected receives advice in writing
from its counsel that there is a reasonable basis to believe that the Company is
not so required by applicable federal laws or regulations and delivers a copy of
such written advice to the Company, the Company shall not be permitted to
condition the making of any such distribution in respect of any Series G
Preferred Share on the holder of such Series G Preferred Shares depositing with
the Company any Withholding Tax with respect to such distribution, PROVIDED,
HOWEVER, the Company may reasonably condition the making of any such
distribution in respect of any Series G Preferred Share on the holder of such
Series G Preferred Shares executing and delivering to the Company, at the
election of the holder, either: (i) if applicable, a properly completed Internal
Revenue Service Form 4224, or (a) an indemnification agreement in reasonably
acceptable form, with respect to any federal tax liability, penalties and
interest that may be imposed upon the Company by the Internal Revenue Service as
a result of the Company's failure to withhold in connection with such
distribution to such holder.
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designations to be signed by ___________________, its ____________________, as
of the ______ day of _____________, 2003.
HOMECOM COMMUNICATIONS, INC.
By:
--------------------------------
EXHIBIT I
HOMECOM COMMUNICATIONS, INC.
CONVERSION NOTICE
Reference is made to the Certificate of Designations, Preferences and Rights of
HomeCom Communications, Inc. (the "CERTIFICATE OF DESIGNATIONS"). In accordance
with and pursuant to the Certificate of Designations, the undersigned hereby
elects to convert the number of shares of Series G Convertible Preferred Stock,
$.01 par value per share (the "Series G PREFERRED SHARES"), of HomeCom
Communications, Inc., a Delaware corporation (the "COMPANY"), indicated below
into shares of Common Stock, $.0001 par value per share (the "COMMON STOCK"), of
the Company, by tendering the stock certificate(s) representing the share(s) of
Series G Preferred Shares specified below as of the date specified below.
The undersigned acknowledges that any sales by the undersigned of the securities
issuable to the undersigned upon conversion of the Series G Preferred Shares
shall be made only pursuant to (i) a registration statement effective under the
Securities Act of 1933, as amended (the "ACT"), or (ii) advice of counsel that
such sale is exempt from registration required by Section 5 of the Act.
Date of Conversion:
---------------------------------------------
Number of Series G
Preferred Shares to be converted
---------------------------------------------
Stock certificate no(s). of Series G
Preferred Shares to be converted:
---------------------------------------------
Please confirm the following information:
Number of shares of Common
Stock to be issued:
---------------------------------------------
please issue the Common Stock into which the Series G Preferred Shares are being
converted in the following name and to the following address:
Issue to:(1)
---------------------------------------------
---------------------------------------------
Facsimile Number:
---------------------------------------------
Authorization:
---------------------------------------------
By:
---------------------------------------------
Title:
---------------------------------------------
Dated:
---------------------------------------------
ACKNOWLEDGED AND AGREED:
HOMECOM COMMUNICATIONS, INC.
By: ________________________________
Name: ______________________________
Title: _____________________________
Date: ___________________
--------
(1) If other than to the record holder of the SERIES G Preferred Shares,
any applicable transfer tax must be paid by the undersigned.
