Exhibit 6(d)
Investment Agreement by and between the
Company and Xxxxxx Private Equity, LLC.
Dated June 3, 1999
ALOTTAFUN!, INC.
INVESTMENT AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE OR OTHER SECURITIES
AUTHORITIES. THEY MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE FEDERAL AND STATE SECURITIES LAWS.
THIS INVESTMENT AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, ANY OF THE SECURITIES DESCRIBED
HEREIN BY OR TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL. THESE SECURITIES HAVE NOT BEEN
RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES AUTHORITIES, NOR HAVE
SUCH AUTHORITIES CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF
THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. THE
INVESTOR MUST RELY ON ITS OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT
OF THE RISKS INVOLVED. SEE THE RISK FACTORS SET FORTH IN THE ATTACHED
DISCLOSURE DOCUMENTS AS EXHIBIT J.
SEE ADDITIONAL LEGENDS AT SECTIONS 4.7.
THIS INVESTMENT AGREEMENT (this "Agreement") is made as of the
3rd day of June, 1999, by and between Alottafun!, Inc., a corporation duly
organized and existing under the laws of the State of Delaware (the "Company"),
and the undersigned Investor executing this Agreement ("Investor").
RECITALS:
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue to the Investor, and the
Investor shall purchase from the Company, from time to time as provided herein,
shares of the Company's Common Stock (the "Common Stock"), as part of an
offering of Common Stock by the Company to Investor, for a maximum aggregate
offering amount of Twenty Million Dollars ($20,000,000) (the "Maximum Offering
Amount"); and
WHEREAS, the solicitation of this Investment Agreement and, if accepted
by the Company, the offer and sale of the Common Stock are being made in
reliance upon the provisions of Section 4(2) promulgated under the Act,
Regulation D promulgated under the Act, and/or upon such other exemption from
the registration requirements of the Act as may be available with respect to any
or all of the purchases of Common Stock to be made hereunder.
TERMS:
NOW, THEREFORE, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement (including the
recitals above), the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"20% Approval" shall have the meaning set forth in Section 5.26.
"Accredited Investor" shall have the meaning set forth in Section 3.1.
"Act" shall mean the Securities Act of 1933, as amended.
"Advance Put Notice" shall have the meaning set forth in Section
2.3.1(a), the form of which is attached hereto as Exhibit E.
"Advance Put Notice Confirmation" shall have the meaning set forth in
Section 2.3.1(a), the form of which is attached hereto as Exhibit F.
"Advance Put Notice Date" shall have the meaning set forth in Section
2.3.1(a).
"Affiliate" shall have the meaning as set forth Section 6.5.
"Aggregate Issued Shares" equals the aggregate number of shares of
Common Stock issued to Investor pursuant to the terms of this Agreement or the
Registration Rights Agreement as of a given date, including Put Shares and
Warrant Shares.
"Agreed Upon Procedures Report" shall have the meaning set forth in
Section 2.6.3(b).
"Agreement" shall mean this Investment Agreement.
"Automatic Termination" shall have the meaning set forth in Section
2.3.2.
"Bring Down Cold Comfort Letters" shall have the meaning set forth in
Section 2.3.6(b).
"Business Day" shall mean any day during which the Principal Market is
open for business.
"Calendar Month" shall mean the period of time beginning on the numeric
day in question in a calendar month (the "Numeric Day") and for Calendar Months
thereafter, beginning on the earlier of (i) the same Numeric Day of the next
calendar month or (ii) the last day of the next calendar month. Each Calendar
Month shall end on the day immediately preceding the beginning of the next
succeeding Calendar Month.
"Cap Amount" shall have the meaning set forth in Section 2.3.11.
"Capital Raising Limitations" shall have the meaning set forth in
Section 6.6.1.
"Capitalization Schedule" shall have the meaning set forth in Section
3.2.4, attached hereto as Exhibit K.
"Closing" shall mean one of (i) the Investment Commitment Closing and
(ii) each closing of a purchase and sale of Common Stock pursuant to Section 2.
"Closing Bid Price" means, for any security as of any date, the last
closing bid price for such security on the O.T.C. Bulletin Board, or, if the
O.T.C. Bulletin Board is not the principal securities exchange or 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 such principal securities exchange or 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 electronic bulletin board for such security, or,
if no closing bid price is reported for such security, the average of the bid
prices of any market makers for such security as reported in the "pink sheets"
by the National Quotation Bureau, Inc. 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 mutually determined by the Company and the Investor in this Offering. If the
Company and the Investor in this Offering are unable to agree upon the fair
market value of the Common Stock, then such dispute shall be resolved by an
investment banking firm mutually acceptable to the Company and the Investor in
this offering and any fees and costs associated therewith shall be paid by the
Company.
"Commitment Evaluation Period" shall have the meaning set forth in
Section 2.7.
"Common Shares" shall mean the shares of Common Stock of the Company.
"Commitment Warrants" shall have the meaning set forth in Section 2.7.
"Commitment Warrant Exercise Price" shall have the meaning set forth in
Section 2.7.
"Common Stock" shall mean the common stock of the Company.
"Company" shall mean Alottafun!, Inc., a corporation duly organized and
existing under the laws of the State of Delaware.
"Company Designated Maximum Put Dollar Amount" shall have the meaning
set forth in Section 2.3.1(a).
"Company Designated Minimum Put Share Price" shall have the meaning set
forth in Section 2.3.1(a).
"Company Termination" shall have the meaning set forth in Section
2.3.14.
"Conditions to Investor's Obligations" shall have the meaning as set
forth in Section 2.2.4.
"Delisting Event" shall mean any time during the term of this
Investment Agreement, that the Company's Common Stock is not listed for and
actively trading on the O.T.C. Bulletin Board, the Nasdaq Small Cap Market, the
Nasdaq National Market, the American Stock Exchange, or the New York Stock
Exchange or is suspended or delisted with respect to the trading of the shares
of Common Stock on such market or exchange.
"Disclosure Documents" shall have the meaning as set forth in Section
3.2.4.
"Due Diligence Review" shall have the meaning as set forth in Section
2.6
"Effective Date" shall have the meaning set forth in Section 2.3.1.
"Evaluation Day" shall have the meaning set forth in Section 2.3.7(b).
"Equity Securities" shall have the meaning set forth in Section 6.6.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Excluded Day" shall have the meaning set forth in Section 2.3.7(b).
"Extended Put Period" shall mean the period of time between the
Advanced Put Notice Date until the Purchase Period End Date.
"Impermissible Put Cancellation" shall have the meaning set forth in
Section 2.3.1(e).
"Indemnified Liabilities" shall have the meaning set forth in Section
9.
"Indemnities" shall have the meaning set forth in Section 9.
"Indemnitor" shall have the meaning set forth in Section 9.
"Individual Put Limit" shall have the meaning set forth in Section
2.3.1 (b).
"Ineffective Period" shall mean any period of time that the
Registration Statement or any Supplemental Registration Statement (each as
defined in the Registration Rights Agreement) becomes ineffective or unavailable
for use for the sale or resale, as applicable, of any or all of the Registrable
Securities (as defined in the Registration Rights Agreement) for any reason (or
in the event the prospectus under either of the above is not current and
deliverable) during any time period required under the Registration Rights
Agreement.
"Intended Put Share Amount" shall have the meaning set forth in Section
2.3.1(a).
"Investment Commitment Closing" shall have the meaning set forth in
Section 2.2.3.
"Investment Agreement" shall mean this Investment Agreement.
"Investment Commitment Opinion of Counsel" shall mean an opinion from
Company's independent counsel, substantially in the form attached as Exhibit B,
or such other form as agreed upon by the parties, as to the Investment
Commitment Closing.
"Investment Date" shall mean the date of the Investment Commitment
Closing.
"Investor" shall have the meaning set forth in the preamble hereto.
"Key Employee" shall have the meaning set forth in Section 5.18, as set
forth in Exhibit N. "Late Payment Amount" shall have the meaning set
forth in Section 2.3.8.
"Legend" shall have the meaning set forth in Section 4.7.
"Major Transaction" shall mean and shall be deemed to have occurred at
such time upon any of the following events:
(i) a consolidation, merger or other business combination or
event or transaction following which the holders of Common Stock of the Company
immediately preceding such consolidation, merger, combination or event either
(i) no longer hold a majority of the shares of Common Stock of the Company or
(ii) no longer have the ability to elect the board of directors of the Company
(a "Change of Control"); provided, however, that if the other entity involved in
such consolidation, merger, combination or event is a publicly traded company
with "Substantially Similar Trading Characteristics" (as defined below) as the
Company and the holders of Common Stock are to receive solely Common Stock or no
consideration (if the Company is the surviving entity) or solely common stock of
such other entity (if such other entity is the surviving entity), such
transaction shall not be deemed to be a Major Transaction (provided the
surviving entity, if other than the Company, shall have agreed to assume all
obligations of the Company under this Agreement and the Registration Rights
Agreement). For purposes hereof, an entity shall have Substantially Similar
Trading Characteristics as the Company if the average daily dollar trading
volume of the common stock of such entity is equal to or in excess of $200,000
for the 90th through the 31st day prior to the public announcement of such
transaction;
(ii) the sale or transfer of all or substantially all of the Company's
assets; or
(iii) a purchase, tender or exchange offer made to the holders of
outstanding shares of Common Stock, such that following such purchase, tender or
exchange offer a Change of Control shall have occurred.
"Market Price" shall equal the lowest intra-day trade price for the
Common Stock on the Principal Market for the six (6) Business Days immediately
preceding the date of the applicable Purchase Notice.
"Material Facts" shall have the meaning set forth in Section 2.3.6(a).
"Maximum Put Dollar Amount" shall mean the lesser of (a) the Company
Designated Maximum Put Dollar Amount, if any, specified by the Company in a Put
Notice, and (ii) $2 million.
"Maximum Offering Amount" shall mean Twenty Million Dollars
($20,000,000).
"Nasdaq 20% Rule" shall have the meaning set forth in Section 2.3.11.
"NASD" shall have the meaning set forth in Section 6.10.
"NYSE" shall have the meaning set forth in Section 6.10.
"Numeric Day" shall mean the numerical day of the month of the
Investment Date.
"Offering" shall mean the Company's offering of common stock and
warrants issued under this Investment Agreement.
"Officer's Certificate" shall mean a certificate, signed by an officer
of the Company, to the effect that the representations and warranties of the
Company in this Agreement required to be true for the applicable Closing are
true and correct in all material respects and all of the conditions and
limitations set forth in this Agreement for the applicable Closing are
satisfied.
"Opinion of Counsel" shall mean, as applicable, the Investment
Commitment Opinion of Counsel, the Put Opinion of Counsel, the Registration
Opinion and the Purchase Warrant Opinion of Counsel.
"Payment Due Date" shall have the meaning set forth in Section 2.3.8.
"Principal Market" shall mean the O.T.C. Bulletin Board, the Nasdaq
Small Cap Market, the Nasdaq National Market, the American Stock Exchange or the
New York Stock Exchange, whichever is at the time the principal trading exchange
or market for the Common Stock.
"Proceeding" shall have the meaning as set forth Section 5.1.
"Purchase" shall have the meaning set forth in Section 2.3.7(a).
"Purchase Notice" shall have the meaning set forth in Section 2.3.7(c),
in the form attached as Exhibit P.
"Purchase Notice Date" shall have the meaning set forth in Section
2.3.7(c).
"Purchase Period" shall have the meaning set forth in Section 2.3.7(b).
"Purchase Period End Date" shall mean the last Business Day of any
Purchase Period.
"Purchase Warrants" shall have the meaning set forth in Section 2.4.2.
"Purchase Warrant Exercise Price" shall have the meaning set forth in
Section 2.4.2.
"Purchase Warrant Opinion of Counsel" shall mean an opinion from
Company's independent counsel, substantially in the form attached as Exhibit O,
or such other form as agreed upon by the parties, as to the issuance of Purchase
Warrants to the Investor.
"Put" shall have the meaning set forth in Section 2.3.1(d).
"Put Cancellation" shall have the meaning set forth in Section
2.3.13(a).
"Put Cancellation Notice Confirmation" shall have the meaning set forth
in Section 2.3.13(c), the form of which is attached hereto as Exhibit S.
"Put Cancellation Date" shall have the meaning set forth in Section
2.3.13(a).
"Put Cancellation Notice" shall have the meaning set forth in Section
2.3.13(a), the form of which is attached hereto as Exhibit Q.
"Put Closing" shall have the meaning set forth in Section 2.3.8.
"Put Closing Date" shall have the meaning set forth in Section 2.3.8.
"Put Date" shall mean the date that is specified by the Company in any
Put Notice for which the Company intends to exercise a Put under Section 2.3.1,
unless the Put Date is postponed pursuant to the terms hereof, in which case the
"Put Date" is such postponed date.
"Put Dollar Amount" shall be determined by multiplying the Put Share
Amount by the Put Share Price with respect to such Put Shares, subject to the
limitations herein.
"Put Notice" shall have the meaning set forth in Section 2.3.1(d), the
form of which is attached hereto as Exhibit G.
"Put Notice Confirmation" shall have the meaning set forth in Section
2.3.1(d), the form of which is attached hereto as Exhibit H.
"Put Opinion of Counsel" shall mean an opinion from Company's
independent counsel, in the form attached as Exhibit I, or such other form as
agreed upon by the parties, as to any Put Closing.
"Put Share Amount" shall have the meaning as set forth Section
2.3.1(b).
"Put Share Price" shall have the meaning set forth in Section 2.3.1(c).
"Put Shares" shall mean shares of Common Stock that are purchased by
the Investor pursuant to a Put.
"Registrable Securities" shall have the meaning as set forth in the
Registration Rights Agreement.
"Registration Opinion" shall have the meaning set forth in Section
2.3.6(a).
"Registration Opinion Deadline" shall have the meaning set forth in
Section 2.3.6(a).
"Registration Rights Agreement" shall mean that certain registration
rights agreement entered into by the Company and Investor on even date herewith,
in the form attached hereto as Exhibit A, or such other form as agreed upon by
the parties.
"Registration Statement" shall have the meaning as set forth in the
Registration Rights Agreement.
"Regulation D" shall mean Regulation D promulgated under the Securities
Act of 1933, as amended.
"Reporting Issuer" shall have the meaning set forth in Section 6.2.
"Required Put Documents" shall have the meaning set forth in Section
2.3.5.
"Risk Factors" shall have the meaning set forth in Section 3.2.4,
attached hereto as Exhibit J.
"Schedule of Exceptions" shall have the meaning set forth in Section 5,
and is attached hereto as Exhibit C.
"SEC" shall mean the Securities and Exchange Commission.
"Securities" shall mean this Investment Agreement, together with the
Common Stock of the Company, the Warrants and the Warrant Shares issuable
pursuant to this Investment Agreement.
"Semi-Annual Non-Usage Fee" shall have the meaning set forth in Section
2.7.
"Share Authorization Increase Approval" shall have the meaning set
forth in Section 5.26.
"Six Month Anniversary" shall mean the date that is the same Numeric
Day of the sixth (6th) calendar month after the Investment Date, and the date
that is the same Numeric Day of each sixth (6th) calendar month thereafter,
provided that if such date is not a Business Day, the next Business Day
thereafter.
"Stockholder 20% Approval" shall have the meaning set forth in Section
6.12.
"Supplemental Registration Statement" shall have the meaning set forth
in the Registration Rights Agreement.
"Term" shall mean the term of this Agreement, which shall be a period
of time beginning on the date of this Agreement and ending on the Termination
Date.
"Termination Date" shall mean the earlier of (i) the date that is three
(3) years after the date of this Agreement, or (ii) the date that is thirty (30)
Business Days after the later of (a) the Put Closing Date on which the sum of
the aggregate Put Share Price for all Put Shares equal the Maximum Offering
Amount, (b) the date that the Company has delivered a Termination Notice to the
Investor, (c) the date of an Automatic Termination, and (d) the date that all of
the Warrants have been exercised.
"Termination Fee" shall have the meaning as set forth in Section 2.7.
"Termination Notice" shall have the meaning as set forth in Section
2.3.14.
"Third Party Report" shall have the meaning set forth in Section 3.2.4.
"Transaction Documents" shall have the meaning set forth in Section 9.
"Transfer Agent Instructions" shall mean the Company's instructions to
its transfer agent, substantially in the form attached hereto as Exhibit T, or
such other form as agreed upon by the parties.
"Trigger Price" shall have the meaning set forth in Section 2.3.7(b).
"Truncated Purchase Period" shall have the meaning set forth in Section
2.3.7(b).
"Truncated Put Share Amount" shall have the meaning set forth in
Section 2.3.13(b).
"Unlegended Share Certificates" shall mean a certificate or
certificates, or electronically delivered shares, as appropriate (in
denominations as instructed by Investor) representing the shares of Common Stock
to which the Investor is then entitled to receive, registered in the name of
Investor or its nominee (as instructed by Investor) and not containing a
restrictive legend and not subject to any stop transfer order, including but not
limited to the Put Shares for the applicable Put and Warrant Shares.
"Use of Proceeds Schedule" shall have the meaning as set forth in
Section 3.2.4, attached hereto as Exhibit L.
"Warrant Shares" shall mean the Common Stock issuable upon exercise of
the Warrants.
"Warrants" shall mean the Commitment Warrants and the Purchase
Warrants.
2. Purchase and Sale of Common Stock.
2.1 Offer to Subscribe.
Subject to the terms and conditions herein and the
satisfaction of the conditions to closing set forth in Sections 2.2 and 2.3
below, Investor hereby agrees to purchase such amounts of Common Stock and
accompanying Warrants as the Company may, in its sole and absolute discretion,
from time to time elect to issue and sell to Investor according to one or more
Puts pursuant to Section 2.3 below.
2.2 Investment Commitment.
2.2.1 [Intentionally Left Blank].
2.2.2 [Intentionally Left Blank].
2.2.3 Investment Commitment Closing.
The closing of this Agreement (the "Investment Commitment Closing") shall be
deemed to occur when this Agreement and the Registration Rights Agreement have
been executed by both Investor and the Company, the Transfer Agent Instructions
have been executed by both the Company and the Transfer Agent, and the other
Conditions to Investor's Obligations set forth in Section 2.2.4 below have been
met.
2.2.4 Conditions to Investor's Obligations. As
a prerequisite to the Investment Commitment Closing and the Investor's
obligations hereunder, all of the following (the "Conditions to Investor's
Obligations") shall have been satisfied prior to or concurrently with the
Company's execution and delivery of this Agreement:
(a) the following documents shall have been delivered to
the Investor: (i) the Registration Rights Agreement
(executed by the Company and Investor), (ii) the
Investment Commitment Opinion of Counsel (signed by
the Company's counsel), (iii) the Transfer Agent
Instructions (executed by the Company and the
Transfer Agent), and (iv) a Secretary's Certificate
as to (A) the resolutions of the Company's board of
directors authorizing this transaction, (B) the
Company's Certificate of Incorporation, and (C) the
Company's Bylaws;
(b) this Investment Agreement, accepted by the Company,
shall have been received by the Investor;
(c) [Intentionally Left Blank];
(d) the Company's Common Stock shall be listed for
trading and actually trading on the O.T.C. Bulletin
Board, the Nasdaq Small Cap Market, the Nasdaq
National Market, the American Stock Exchange or the
New York Stock Exchange;
(e) other than continuing losses described in the Risk
Factors set forth in the Disclosure Documents
(provided for in Section 3.2.4), as of the Closing
there have been no material adverse changes in the
Company's business prospects or financial condition
since the date of the last balance sheet included in
the Disclosure Documents, including but not limited
to incurring material liabilities; and
(f) the representations and warranties of the Company in
this Agreement shall be true and correct in all
material respects and the conditions to Investor's
obligations set forth in this Section 2.2.4 shall
have been satisfied as of such Closing; and the
Company shall deliver an Officer's Certificate,
signed by an officer of the Company, to such effect
to the Investor.
2.3 Puts of Common Shares to the Investor.
2.3.1 Procedure to Exercise a Put. Subject to the
Individual Put Limit, the Maximum Offering Amount and the Cap Amount (if
applicable), and the other conditions and limitations set forth in this
Agreement, at any time beginning on the date on which the Registration Statement
is declared effective by the SEC (the "Effective Date"), the Company may, in its
sole and absolute discretion, elect to exercise one or more Puts according to
the following procedure, provided that each subsequent Put Date after the first
Put Date shall be no sooner than twenty (20) Business Days following the
preceding Put Date:
(a) Delivery of Advance Put Xxxxxx.Xx least
ten (10) Business Days but not more than twenty (20) Business Days prior to any
intended Put Date (unless otherwise agreed in writing by the Investor), the
Company shall deliver advance written notice (the "Advance Put Notice," the form
of which is attached hereto as Exhibit E, the date of such Advance Put Notice
being the "Advance Put Notice Date") to Investor stating the Put Date for which
the Company shall, subject to the limitations and restrictions contained herein,
exercise a Put and stating the number of shares of Common Stock (subject to the
Individual Put Limit and the Maximum Put Dollar Amount) which the Company
intends to sell to the Investor during the Purchase Period (the "Intended Put
Share Amount").
The Company may, at its option, also designate in any Advance Put
Notice (i) a maximum dollar amount of Common Stock, not to exceed $2,000,000,
which it shall sell to Investor during the Put (the "Company Designated Maximum
Put Dollar Amount") and/or (ii) a minimum purchase price per Put Share at which
the Investor may purchase Shares pursuant to such Put Notice during the related
Purchase Period (a "Company Designated Minimum Put Share Price"). The Company
Designated Minimum Put Share Price, if applicable, shall be no greater than 80%
of the Closing Bid Price of the Company's common stock on the Advance Put Notice
Date.
Notwithstanding the above, if, at the time of delivery of an Advance
Put Notice, more than two (2) Calendar Months have passed since the previous Put
Date, such Advance Put Notice shall provide at least twenty (20) Business Days
notice of the intended Put Date, unless waived in writing by the Investor. In
order to effect delivery of the Advance Put Notice, the Company shall (i) send
the Advance Put Notice by facsimile on such date so that such notice is received
by the Investor by 6:00 p.m., New York, NY time, and (ii) surrender such notice
on such date to a courier for overnight delivery to the Investor (or two (2) day
delivery in the case of an Investor residing outside of the U.S.). Upon receipt
by the Investor of a facsimile copy of the Advance Put Notice, the Investor
shall, within two (2) Business Days, send, via facsimile, a confirmation of
receipt (the "Advance Put Notice Confirmation," the form of which is attached
hereto as Exhibit F) of the Advance Put Notice to the Company specifying that
the Advance Put Notice has been received and affirming the intended Put Date and
the Intended Put Share Amount.
(b) Put Share Amount. The "Put Share
Amount" is the number of shares of Common Stock that the Investor shall be
obligated to purchase in a given Put, and shall equal the lesser of (i) the
Intended Put Share Amount, and (ii) the Individual Put Limit. The "Individual
Put Limit" shall equal the lesser of (i) 15% of the sum of the aggregate daily
reported trading volumes in the outstanding Common Stock on the Company's
Principal Market, excluding any block trades of 20,000 or more shares of Common
Stock, for all Evaluation Days (as defined below) in the Purchase Period, (ii)
the number of Put Shares which, when multiplied by their respective Put Share
Prices, equals the Maximum Put Dollar Amount, and (iii) 9.9% of the total amount
of the Company's Common Stock that would be outstanding upon completion of the
Put, but shall in no event exceed 15% of the sum of the aggregate daily reported
trading volumes in the outstanding Common Stock on the Company's Principal
Market, excluding any block trades of 20,000 or more shares of Common Stock, for
the twenty (20) Trading Days immediately preceding the Put Date (this
limitation, together with the limitation in (i) immediately above, are
collectively referred to herein as the "Volume Limitations"). The Investor, at
its option, may waive all or any portion of the Volume Limitations, and purchase
a number of Put Shares up to the full Intended Put Share Amount, subject only to
the Company Designated Maximum Put Dollar Amount.
(c) Put Share Price. The purchase price for
the Put Shares (the "Put Share Price") shall equal the lesser of (i) the Market
Price for such Put, minus $.10, or (ii) 91% of the Market Price for such Put,
but shall in no event be less than the Company Designated Minimum Put Share
Price for such Put, if applicable.
(d) Delivery of Put Notice. After delivery
of an Advance Put Notice, on the Put Date specified in the Advance Put Notice
(which Put Date shall be no sooner than the Business Day immediately following
the last day of the previous Purchase Period), the Company shall deliver written
notice (the "Put Notice," the form of which is attached hereto as Exhibit G) to
Investor stating (i) the Put Date, (ii) the Intended Put Share Amount as
specified in the Advance Put Notice (such exercise a "Put"), (iii) the Company
Designated Maximum Put Dollar Amount (if applicable), and (iv) the Company
Designated Minimum Put Share Price (if applicable). In order to effect delivery
of the Put Notice, the Company shall (i) send the Put Notice by facsimile on the
Put Date so that such notice is received by the Investor by 6:00 p.m., New York,
NY time, and (ii) surrender such notice on the Put Date to a courier for
overnight delivery to the Investor (or two (2) day delivery in the case of an
Investor residing outside of the U.S.). Upon receipt by the Investor of a
facsimile copy of the Put Notice, the Investor shall, within two (2) Business
Days, send, via facsimile, a confirmation of receipt (the "Put Notice
Confirmation," the form of which is attached hereto as Exhibit H) of the Put
Notice to Company specifying that the Put Notice has been received and affirming
the Put Date and the Intended Put Share Amount.
(e) Delivery of Required Put Documents. On
or before the Put Date for such Put, the Company shall deliver the Required Put
Documents (as defined in Section 2.3.5 below) to the Investor (or to an agent of
Investor, if Investor so directs). Unless otherwise specified by the Investor,
the Put Shares of Common Stock shall be transmitted electronically pursuant to
such electronic delivery system as the Investor shall request; otherwise
delivery shall be by physical certificates. If the Company has not delivered all
of the Required Put Documents to the Investor on or before the Put Date, the Put
shall be automatically cancelled, unless the Investor agrees to delay the Put
Date by up to three (3) Business Days, in which case the Purchase Period begins
on the Business Day following such new Put Date. If the Company has not
delivered all of the Required Put Documents to the Investor on or before the Put
Date (or new Put Date, if applicable), and the Investor has not agreed in
writing to delay the Put Date, the Put is automatically canceled (an
"Impermissible Put Cancellation") and, unless the Put was otherwise canceled in
accordance with the terms of Section 2.3.13, the Company shall pay the Investor
$5,000 for its reasonable due diligence expenses incurred in preparation for the
canceled Put and the Company may deliver an Advance Put Notice for the
subsequent Put no sooner than ten (10) Business Days after the date that such
Put was canceled.
2.3.2 Termination of Right to Put. The Company's
right to require the Investor to purchase any subsequent Put Shares shall
terminate permanently (each, an "Automatic Termination"), unless waived in
writing by the Investor, upon the occurrence of any of the following:
(a) the Company shall not exercise a Put or any Put thereafter if, at
any time, either the Company or any director or executive officer of the Company
has engaged in a transaction or conduct related to the Company that gives rise
to (i) a Securities and Exchange Commission enforcement action, or (ii) a civil
judgment or criminal conviction for fraud or misrepresentation, or for any other
offense that, if prosecuted criminally, would constitute a felony under
applicable law;
(b) the Company shall not exercise a Put or any Put thereafter, on any
date after a cumulative time period, including both Ineffective Periods and
Delisting Events, that lasts for an aggregate of four (4) months;
(c) the Company shall not exercise a Put or any Put thereafter if at
any time the Company has filed for and/or is subject to any bankruptcy,
insolvency, reorganization or liquidation proceedings or other proceedings for
relief under any bankruptcy law or any law for the relief of debtors instituted
by or against the Company or any subsidiary of the Company; provided that in the
event that an involuntary bankruptcy petition is filed against the Company, the
Company shall have sixty (60) days to obtain dismissal of such petition before
such Put prohibition shall initiate;
(d) the Company shall not exercise a Put after the sooner of (i) the
date that is three (3) years after the date of this Agreement, or (ii) the Put
Closing Date on which the aggregate of the Put Dollar Amounts for all Puts equal
the Maximum Offering Amount; and
(e) the Company shall not exercise a Put after the Company has breached
any covenant in Section 2.7, Section 6, or Section 9 hereof.
2.3.3 Put Limitations. The Company's right to exercise a Put shall be
limited as follows, unless waived in writing by the Investor:
(a) [Intentionally Left Blank].
(b) notwithstanding the amount of any Put,
the Investor shall not be obligated to purchase any additional Put Shares once
the aggregate Put Dollar Amount paid by Investor equals the Maximum Offering
Amount;
(c) the Investor shall not be obligated
to acquire and pay for the Put Shares with respect to any Put for which the
Company has announced a subdivision or combination, including a reverse split,
of its Common Stock or has subdivided or combined its Common Stock during the
Extended Put Period;
(d) the Investor shall not be obligated
to acquire and pay for the Put Shares with respect to any Put for which the
Company has paid a dividend of its Common Stock or has made any other
distribution of its Common Stock during the Extended Put Period;
(e) the Investor shall not be obligated
to acquire and pay for the Put Shares with respect to any Put for which the
Company has made, during the Extended Put Period, a distribution of all or any
portion of its assets or evidences of indebtedness to the holders of its Common
Stock;
(f) the Investor shall not be obligated
to acquire and pay for the Put Shares with respect to any Put for which a Major
Transaction has occurred during the Extended Put Period;
2.3.4 Conditions Precedent to the Right of the
Company to Deliver an Advance Put Notice or a Put Notice and the Obligation of
the Investor to Purchase Put Shares. The right of the Company to deliver an
Advance Put Notice or a Put Notice and the obligation of the Investor hereunder
to acquire and pay for the Put Shares incident to a Closing is subject to the
satisfaction, on (i) the date of delivery of such Advance Put Notice or Put
Notice and (ii) the applicable Put Closing Date, of each of the following
conditions, unless waived in writing by the Investor:
(a) the Company's Common Stock shall be listed for and
actively trading on the O.T.C. Bulletin Board, the
Nasdaq Small Cap Market, the Nasdaq National Market
or the New York Stock Exchange and the Put Shares
shall be so listed, and to the Company's knowledge
there is no notice of any suspension or delisting
with respect to the trading of the shares of Common
Stock on such market or exchange;
(b) the Company shall have satisfied any and all
obligations pursuant to the Registration Rights
Agreement, including, but not limited to, the filing
of the Registration Statement with the SEC with
respect to the resale of all Registrable Securities
and the requirement that the Registration Statement
shall have been declared effective by the SEC for the
resale of all Registrable Securities and the Company
shall have satisfied and shall be in compliance with
any and all obligations pursuant to this Agreement
and the Warrants;
(c) [Intentionally Left Blank].
(d) the representations and warranties of the Company are
true and correct in all material respects as if made
on such date and the conditions to Investor's
obligations set forth in this Section 2.3.4 are
satisfied as of such Closing, and the Company shall
deliver a certificate, signed by an officer of the
Company, to such effect to the Investor;
(e) the Company shall have reserved for issuance a
sufficient number of Common Shares for the purpose of
enabling the Company to satisfy any obligation to
issue Common Shares pursuant to any Put and to effect
exercise of the Warrants;
(f) the Registration Statement is not subject to an
Ineffective Period as defined in the Registration
Rights Agreement, the prospectus included therein is
current and deliverable, and to the Company's
knowledge there is no notice of any investigation or
inquiry concerning any stop order with respect to the
Registration Statement; and
(g) if the Aggregate Issued Shares after the Closing of
the Put would exceed the Cap Amount, the Company
shall have obtained the Stockholder 20% Approval as
specified in Section 6.12.
2.3.5 Documents Required to be Delivered on the
Put Date as Conditions to Closing of any Put. The Closing of any Put and
Investor's obligations hereunder shall additionally be conditioned upon the
delivery to the Investor of each of the following (the "Required Put Documents")
on or before the applicable Put Date, unless waived or extended in writing by
the Investor:
(a) a number of Unlegended Share
Certificates (or freely tradeable electronically
delivered shares, as appropriate) equal to the
Intended Put Share Amount, in denominations of not
more than 50,000 shares per certificate;
(b) the following documents: Put Opinion of
Counsel, Officer's Certificate, Put Notice, any
required Registration Opinion, and any report or
disclosure required under Section 2.3.6 or Section
2.6;
(c) current Risk Factors; and
(d) all documents, instruments and other
writings required to be delivered on or before the
Put Date pursuant to any provision of this Agreement
in order to implement and effect the transactions
contemplated herein.
2.3.6 Accountant's Letter and Registration Opinion.
(a) The Company shall have caused to be delivered to the
Investor, (i) whenever required by Section 2.3.6(b) or by Section 2.6.3, and
(ii) on the date that is three (3) Business Days prior to each Put Date (the
"Registration Opinion Deadline"), an opinion of the Company's independent
counsel, in substantially the form of Exhibit R (the "Registration Opinion"),
addressed to the Investor stating, inter alia, that no facts ("Material Facts")
have come to such counsel's attention that have caused it to believe that the
Registration Statement is subject to an Ineffective Period or to believe that
the Registration Statement, any Supplemental Registration Statement (as each may
be amended, if applicable), and any related prospectuses, contain an untrue
statement of material fact or omits a material fact required to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. If a Registration Opinion cannot be delivered by the
Company's independent counsel to the Investor on the Registration Opinion
Deadline due to the existence of Material Facts or an Ineffective Period, the
Company shall promptly notify the Investor and as promptly as possible amend
each of the Registration Statement and any Supplemental Registration Statements,
as applicable, and any related prospectus or cause such Ineffective Period to
terminate, as the case may be, and deliver such Registration Opinion and updated
prospectus as soon as possible thereafter. If at any time after a Put Notice
shall have been delivered to Investor but before the related Purchase Period End
Date, the Company acquires knowledge of such Material Facts or any Ineffective
Period occurs, the Company shall promptly notify the Investor and shall deliver
a Put Cancellation Notice to the Investor pursuant to Section 2.3.13 by
facsimile and overnight courier by the end of that Business Day.
(b) (i) the Company shall engage its independent auditors to
perform the procedures in accordance with the provisions of Statement on
Auditing Standards No. 71, as amended, as agreed to by the parties hereto, and
reports thereon (the "Bring Down Cold Comfort Letters") as shall have been
reasonably requested by the Investor with respect to certain financial
information contained in the Registration Statement and shall have delivered to
the Investor such a report addressed to the Investor, on the date that is three
(3) Business Days prior to each Put Date.
(ii) in the event that the Investor shall have requested delivery
of an "Agreed Upon Procedures Report" pursuant to Section 2.6.3, the Company
shall engage its independent auditors to perform certain agreed upon procedures
and report thereon as shall have been reasonably requested by the Investor with
respect to certain financial information of the Company and the Company shall
deliver to the Investor a copy of such report addressed to the Investor. In the
event that the report required by this Section 2.3.6(b) cannot be delivered by
the Company's independent auditors, the Company shall, if necessary, promptly
revise the Registration Statement and the Company shall not deliver a Put Notice
until such report is delivered.
2.3.7 Mechanics of Purchase of Put Shares.
(a) Investor's Obligation and Right to Purchase
Shares. Subject to the conditions set forth in this Agreement,
following the Investor's receipt of a validly delivered Put
Notice, the Investor shall be required to purchase (each a
"Purchase") from the Company during the related Purchase Period a
number of Put Shares equal to the Put Share Amount, in the manner
described below.
(b) Purchase Period. For purposes hereof, the
"Purchase Period," shall mean, unless otherwise shortened under
the terms of this Agreement, the period beginning on the Business
Day immediately following the Put Date and ending on and
including the date which is 20 Business Days after such Put Date;
provided that, if a Put Cancellation Notice has been delivered to
the Investor after the Put Date, the Purchase Period for such Put
shall end at 6:00 p.m., New York City time, on the Put
Cancellation Date (a "Truncated Purchase Period").
For purposes of this Agreement:
"Trigger Price" for any Purchase Period shall mean the greater
of (i) the Company Designated Minimum Put Share Price, plus $.10, or (ii) the
Company Designated Minimum Put Share Price divided by .91.
An "Evaluation Day" shall mean each Business Day during a
Purchase Period where the lowest intra-day trading price of the Common Stock is
greater than or equal to the Trigger Price.
An "Excluded Day" shall mean each Business Day where the
lowest intra-day trading price of the Common Stock is less than the Trigger
Price.
(c) Delivery of Purchase Notices. To effect a
purchase of Put Shares, the Investor shall deliver one or more
written notices to the Company (each a "Purchase Notice") at any
time and from time to time during the Purchase Period. Each
Purchase Notice shall set forth (i) the number of Put Shares
being purchased pursuant to such Purchase Notice, (ii) the Put
Share Price per share, and (iii) the aggregate Put Dollar Amount
for the Put Shares being purchased by the Investor pursuant to
such Purchase Notice, as of the date of delivery of such Purchase
Notice. The "Purchase Notice Date" with respect to a Purchase
Notice shall be the date on which the Investor delivers a copy of
such Purchase Notice to the Company by facsimile transmission
prior to 11:59 p.m. Eastern Time on such date.
If prior to the last day of a Purchase Period the
Investor shall not have delivered Purchase Notices covering the
purchase of an aggregate number of Put Shares equal to at least
the Put Share Amount with respect to such Purchase Period, then
the Investor shall be deemed to have delivered a Purchase Notice
on the last day of such Purchase Period covering the purchase of
a number of Put Shares equal to the difference of (x) the Put
Share Amount with respect to such Purchase Period minus (y) the
aggregate number of Put Shares covered by Purchase Notices
delivered by the Investor to the Company during such Purchase
Period.
2.3.8 Mechanics of Put Closing. Each of the Company and the Investor
shall deliver all documents, instruments and writings required to be delivered
by either of them pursuant to this Agreement at or prior to each Closing.
Subject to such delivery and the satisfaction of the conditions set forth in
Sections 2.3.4 and 2.3.5, the closing of the purchase by the Investor of Shares
shall occur by 5:00 PM, New York City Time, on the date which is five (5)
Business Days following the applicable Purchase Notice Date (or such other time
or later date as is mutually agreed to by the Company and the Investor) (the
"Payment Due Date") at the offices of Investor. On or before each Payment Due
Date, the Investor shall deliver to the Company, in the manner specified in
Section 8 below, the Put Dollar Amount to be paid for such Put Shares,
determined as aforesaid. The closing (each a "Put Closing") for each Put shall
occur on the date that both (i) the Company has delivered to the Investor all
Required Put Documents, and (ii) the Investor has delivered to the Company such
Put Dollar Amount and any Late Payment Amount, if applicable (each a "Put
Closing Date").
If the Investor does not deliver to the Company the Put Dollar Amount
for such Put on or before the Payment Due Date, then the Investor shall pay to
the Company, in addition to the Put Dollar Amount, an amount (the "Late Payment
Amount") at a rate of X% per month, accruing daily, multiplied by such Put
Dollar Amount, where "X" equals one percent (1%) for the first month following
the date in question, and increases by an additional one percent (1%) for each
month that passes after the date in question, up to a maximum of five percent
(5%).
2.3.9 [Intentionally Left Blank].
2.3.10 Limitation on Short Sales. The Investor and its Affiliates shall
not engage in short sales of the Company's Common Stock; provided, however, that
the Investor may enter into any short sale or other hedging or similar
arrangement it deems appropriate with respect to Put Shares after it receives a
Put Notice with respect to such Put Shares so long as such sales or arrangements
do not involve more than the number of such Put Shares specified in the Put
Notice.
2.3.11 Cap Amount. If the Company becomes listed on the Nasdaq Small
Cap Market or the Nasdaq National Market, then, unless the Company has obtained
Stockholder 20% Approval as set forth in Section 6.12 or unless otherwise
permitted by Nasdaq, in no event shall the Aggregate Issued Shares exceed the
maximum number of shares of Common Stock (the "Cap Amount") that the Company
can, without stockholder approval, so issue pursuant to Nasdaq Rule
4460(i)(1)(d)(ii) (or any other applicable Nasdaq Rules or any successor rule)
(the "Nasdaq 20% Rule").
2.3.12 [Intentionally Left Blank]
2.3.13 Put Cancellation.
(a) Mechanics of Put Cancellation. If at any time during a Purchase
Period the Company discovers the existence of Material Facts or any Ineffective
Period or Delisting Event occurs, the Company shall cancel the Put (a "Put
Cancellation"), by delivering written notice to the Investor (the "Put
Cancellation Notice"), attached as Exhibit Q, by facsimile and overnight
courier. The "Put Cancellation Date" shall be the date that the Put Cancellation
Notice is first received by the Investor, if such notice is received by the
Investor by 6:00 p.m., New York, NY time, and shall be the following date, if
such notice is received by the Investor after 6:00 p.m., New York, NY time.
(b) Effect of Put Cancellation. Anytime a Put Cancellation Notice is
delivered to Investor after the Put Date, the Put, at the Investor's option,
shall remain effective with respect to the number of Put Shares (the "Truncated
Put Share Amount"), if any, that were included in Purchase Notices delivered by
the Investor on or before 11:59 PM, New York City time, on the Put Cancellation
Date.
(c) Put Cancellation Notice Confirmation. Upon receipt by the Investor
of a facsimile copy of the Put Cancellation Notice, the Investor shall promptly
send, via facsimile, a confirmation of receipt (the "Put Cancellation Notice
Confirmation," a form of which is attached as Exhibit S) of the Put Cancellation
Notice to the Company specifying that the Put Cancellation Notice has been
received and affirming the Put Cancellation Date.
2.3.14 Investment Agreement Cancellation. The Company may terminate (a
"Company Termination") its right to initiate future Puts by providing written
notice ("Termination Notice") to the Investor, by facsimile and overnight
courier, at any time other than during an Extended Put Period, provided that
such termination shall have no effect on the parties' other rights and
obligations under this Agreement, the Registration Rights Agreement or the
Warrants. Notwithstanding the above, any cancellation occurring during an
Extended Put Period is governed by Section 2.3.13.
2.3.15 Return of Excess Common Shares. In the event that the number of
Shares purchased by the Investor pursuant to its obligations hereunder is less
than the Intended Put Share Amount, the Investor shall promptly return to the
Company any shares of Common Stock in the Investor's possession that are not
being purchased by the Investor.
2.4 Warrants.
2.4.1 [Intentionally Omitted].
2.4.2 Purchase Warrants. Within five (5) Business Days of the end of
each Purchase Period, the Company shall issue and deliver to the Investor a
warrant ("Purchase Warrant"), in the form attached hereto as Exhibit D, or such
other form as agreed upon by the parties, to purchase a number of shares of
Common Stock equal to 9% of the number of Put Shares issued to Investor in that
Put. Each Purchase Warrant shall be exerciseable at a price (the "Purchase
Warrant Exercise Price") which shall initially equal 110% of the Market Price on
the Purchase Period End Date, and shall have semi-annual reset provisions. Each
Purchase Warrant shall be immediately exercisable at the Purchase Warrant
Exercise Price, and shall have a term beginning on the date of issuance and
ending on the date that is five (5) years thereafter. The Warrant Shares shall
be registered for resale pursuant to the Registration Rights Agreement.
Concurrently with the issuance and delivery of the Purchase Warrant to the
Investor, the Company shall deliver to the Investor a Purchase Warrant Opinion
of Counsel (signed by the Company's independent counsel).
2.5 [Intentionally Left Blank].
2.6 Due Diligence Review. The Company shall make available for
inspection and review by the Investor (the "Due Diligence Review"), advisors to
and representatives of the Investor (who may or may not be affiliated with the
Investor and who are reasonably acceptable to the Company), any underwriter
participating in any disposition of Common Stock on behalf of the Investor
pursuant to the Registration Statement, any Supplemental Registration Statement,
or amendments or supplements thereto or any blue sky, NASD or other filing, all
financial and other records, all SEC Documents and other filings with the SEC,
and all other corporate documents and properties of the Company as may be
reasonably necessary for the purpose of such review, and cause the Company's
officers, directors and employees to supply all such information reasonably
requested by the Investor or any such representative, advisor or underwriter in
connection with such Registration Statement (including, without limitation, in
response to all questions and other inquiries reasonably made or submitted by
any of them), prior to and from time to time after the filing and effectiveness
of the Registration Statement for the sole purpose of enabling the Investor and
such representatives, advisors and underwriters and their respective accountants
and attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
2.6.1 Treatment of Nonpublic Information. The Company shall not
disclose nonpublic information to the Investor or to its advisors or
representatives unless prior to disclosure of such information the Company
identifies such information as being nonpublic information and provides the
Investor and such advisors and representatives with the opportunity to accept or
refuse to accept such nonpublic information for review. The Company may, as a
condition to disclosing any nonpublic information hereunder, require the
Investor and its advisors and representatives to enter into a confidentiality
agreement (including an agreement with such advisors and representatives
prohibiting them from trading in Common Stock during such period of time as they
are in possession of nonpublic information) in form reasonably satisfactory to
the Company and the Investor.
Nothing herein shall require the Company to disclose nonpublic
information to the Investor or its advisors or representatives, and the Company
represents that it does not disseminate nonpublic information to any investors
who purchase stock in the Company in a public offering, to money managers or to
securities analysts, provided, however, that notwithstanding anything herein to
the contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Investor and, if any, underwriters, of any
event or the existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware, constituting
nonpublic information (whether or not requested of the Company specifically or
generally during the course of due diligence by and such persons or entities),
which, if not disclosed in the Prospectus included in the Registration
Statement, would cause such Prospectus to include a material misstatement or to
omit a material fact required to be stated therein in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading. Nothing contained in this Section 2.6 shall be construed to mean
that such persons or entities other than the Investor (without the written
consent of the Investor prior to disclosure of such information) may not obtain
nonpublic information in the course of conducting due diligence in accordance
with the terms of this Agreement; provided, however, that in no event shall the
Investor's advisors or representatives disclose to the Investor the nature of
the specific event or circumstances constituting any nonpublic information
discovered by such advisors or representatives in the course of their due
diligence without the written consent of the Investor prior to disclosure of
such information.
2.6.2 Disclosure of Misstatements and Omissions. The Investor's
advisors or representatives shall make complete disclosure to the Investor's
counsel of all events or circumstances constituting nonpublic information
discovered by such advisors or representatives in the course of their due
diligence upon which such advisors or representatives form the opinion that the
Registration Statement contains an untrue statement of a material fact or omits
a material fact required to be stated in the Registration Statement or necessary
to make the statements contained therein, in the light of the circumstances in
which they were made, not misleading. Upon receipt of such disclosure, the
Investor's counsel shall consult with the Company's independent counsel in order
to address the concern raised as to the existence of a material misstatement or
omission and to discuss appropriate disclosure with respect thereto; provided,
however, that such consultation shall not constitute the advice of the Company's
independent counsel to the Investor as to the accuracy of the Registration
Statement and related Prospectus.
2.6.3 Procedure if Material Facts are Reasonably Believed to be Untrue
or are Omitted. In the event after such consultation the Investor or the
Investor's counsel reasonably believes that the Registration Statement contains
an untrue statement or a material fact or omits a material fact required to be
stated in the Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading,
(a) the Company shall file with the SEC an amendment to the
Registration Statement responsive to such alleged untrue statement or
omission and provide the Investor, as promptly as practicable, with
copies of the Registration Statement and related Prospectus, as so
amended, or
(b) if the Company disputes the existence of any such material
misstatement or omission, (i) the Company's independent counsel shall
provide the Investor's counsel with a Registration Opinion and (ii) in
the event the dispute relates to the adequacy of financial disclosure
and the Investor shall reasonably request, the Company's independent
auditors shall provide to the Company a letter ("Agreed Upon Procedures
Report") outlining the performance of such "agreed upon procedures" as
shall be reasonably requested by the Investor and the Company shall
provide the Investor with a copy of such letter.
2.7 Commitment Payments. In partial consideration hereof, following the
execution of the Letter of Agreement dated on or about April 5, 1999 between the
Company and the Investor, the Company issued and delivered to Subscriber or its
designated assignees warrants (the "First Commitment Warrants") in the form
attached hereto as Exhibit U, to purchase 225,000 shares of Common Stock. On the
date of the Investment Commitment Closing, the Company shall issue and deliver
to Subscriber or its designated assignees warrants (the "Second Commitment
Warrants," together with the First Commitment Warrants, collectively referred to
as the "Commitment Warrants) in the form attached hereto as Exhibit U, or such
other form as agreed upon by the parties, to purchase 225,000 additional shares
of Common Stock. Each Commitment Warrant shall be exerciseable at a price (the
"Commitment Warrant Exercise Price") which shall initially equal the average
closing bid price for the five (5) trading days immediately preceding April 5,
1999 ("Initial Exercise Price"), and shall have semi-annual reset provisions.
Each Commitment Warrant shall be immediately exercisable at the Commitment
Warrant Exercise Price, and shall have a term beginning on the date of issuance
and ending on date that is five (5) years thereafter. The Warrant Shares shall
be registered for resale pursuant to the Registration Rights Agreement.
Concurrently with the issuance and delivery of the Commitment Warrant to the
Subscriber, the Company shall deliver to the Subscriber a Commitment Warrant
Opinion of Counsel (signed by the Company's independent counsel).
On the last Business Day of each six (6) Calendar Month period
following the Effective Date (each such period a "Commitment Evaluation
Period"), if the Company has not Put at least $1,000,000 in aggregate Put Dollar
Amount during that Commitment Evaluation Period, the Company, in consideration
of Investor's commitment costs, including, but not limited to, due diligence
expenses, shall pay to the Investor an amount (the "Semi-Annual Non-Usage Fee ")
equal to the difference of (i) $100,000, minus (ii) 10% of the aggregate Put
Dollar Amount of the Put Shares put to Investor during that Commitment
Evaluation Period. In the event that the Company delivers a Termination Notice
to the Investor or an Automatic Termination occurs, the Company shall pay to the
Investor (the "Termination Fee") the greater of (i) the Semi-Annual Non-Usage
Fee for the applicable Commitment Evaluation Period, or (ii) the difference of
(x) $200,000, minus (y) 10% of the aggregate Put Dollar Amount of the Put Shares
put to Investor during all Puts to date, and the Company shall not be required
to pay the Semi-Annual Non-Usage Fee thereafter.
Notwithstanding the above, no Semi-Annual Non-Usage Fee shall accrue
during any Commitment Evaluation Period where the Company completed six (6)
Puts, each of which was for the full amount of the Individual Put Limit.
Each Semi Annual Non-Usage Fee or Termination Fee is payable, in cash,
within five (5) business days of the date it accrued. The Company shall not be
required to deliver any payments to Investor under this subsection until
Investor has paid all Put Dollar Amounts that are then due.
3. Representations, Warranties and Covenants of Investor. Investor
hereby represents and warrants to and agrees with the Company as follows:
3.1 Accredited Investor. Investor is an accredited investor
("Accredited Investor"), as defined in Rule 501 of Regulation D, and has checked
the applicable box set forth in Section 10 of this Agreement.
3.2 Investment Experience; Access to Information; Independent
Investigation.
3.2.1 Access to Information. Investor or Investor's professional
advisor has been granted the opportunity to ask questions of and receive answers
from representatives of the Company, its officers, directors, employees and
agents concerning the terms and conditions of this Offering, the Company and its
business and prospects, and to obtain any additional information which Investor
or Investor's professional advisor deems necessary to verify the accuracy and
completeness of the information received.
3.2.2 Reliance on Own Advisors. Investor has relied completely on the
advice of, or has consulted with, Investor's own personal tax, investment, legal
or other advisors and has not relied on the Company or any of its affiliates,
officers, directors, attorneys, accountants or any affiliates of any thereof and
each other person, if any, who controls any of the foregoing, within the meaning
of Section 15 of the Act for any tax or legal advice (other than reliance on
information in the Disclosure Documents as defined in Section 3.2.4 below and on
the Opinion of Counsel). The foregoing, however, does not limit or modify
Investor's right to rely upon covenants, representations and warranties of the
Company in this Agreement.
3.2.3 Capability to Evaluate. Investor has such knowledge and
experience in financial and business matters so as to enable such Investor to
utilize the information made available to it in connection with the Offering in
order to evaluate the merits and risks of the prospective investment, which are
substantial, including without limitation those set forth in the Disclosure
Documents (as defined in Section 3.2.4 below).
3.2.4 Disclosure Documents. Investor, in making Investor's investment
decision to subscribe for the Investment Agreement hereunder, represents that
(a) Investor has received and had an opportunity to review (i) the Risk Factors,
attached as Exhibit J, (the "Risk Factors") (ii) the Capitalization Schedule,
attached as Exhibit K, (the "Capitalization Schedule") and (iii) the Use of
Proceeds Schedule, attached as Exhibit L, (the "Use of Proceeds Schedule"); (b)
Investor has read, reviewed, and relied solely on the documents described in (a)
above, the Company's representations and warranties and other information in
this Agreement, including the exhibits, documents prepared by the Company which
have been specifically provided to Investor in connection with this Offering
(the documents described in this Section 3.2.4 (a) and (b) are collectively
referred to as the "Disclosure Documents"), and an independent investigation
made by Investor and Investor's representatives, if any; (c) Investor has, prior
to the date of this Agreement, been given an opportunity to review material
contracts and documents of the Company which have been filed as exhibits to the
Company's filings under the Act and the Exchange Act and has had an opportunity
to ask questions of and receive answers from the Company's officers and
directors; and (d) is not relying on any oral representation of the Company or
any other person, nor any written representation or assurance from the Company
other than those contained in the Disclosure Documents or incorporated herein or
therein. The foregoing, however, does not limit or modify Investor's right to
rely upon covenants, representations and warranties of the Company in Sections 5
and 6 of this Agreement. Investor acknowledges and agrees that the Company has
no responsibility for, does not ratify, and is under no responsibility
whatsoever to comment upon or correct any reports, analyses or other comments
made about the Company by any third parties, including, but not limited to,
analysts' research reports or comments (collectively, "Third Party Reports"),
and Investor has not relied upon any Third Party Reports in making the decision
to invest.
3.2.5 Investment Experience; Fend for Self. Investor has substantial
experience in investing in securities and it has made investments in securities
other than those of the Company. Investor acknowledges that Investor is able to
fend for Investor's self in the transaction contemplated by this Agreement, that
Investor has the ability to bear the economic risk of Investor's investment
pursuant to this Agreement and that Investor is an "Accredited Investor" by
virtue of the fact that Investor meets the investor qualification standards set
forth in Section 3.1 above. Investor has not been organized for the purpose of
investing in securities of the Company, although such investment is consistent
with Investor's purposes.
3.3 Exempt Offering Under Regulation D.
3.3.1 [Intentionally Left Blank].
3.3.2 No General Solicitation. The Investment Agreement was not offered
to Investor through, and Investor is not aware of, any form of general
solicitation or general advertising, including, without limitation, (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, and
(ii) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
3.3.3 Restricted Securities. Investor understands that the Investment
Agreement is, the Common Stock and Warrants issued at each Put Closing will be,
and the Warrant Shares will be, characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction exempt from the registration requirements of the federal
securities laws and that under such laws and applicable regulations such
securities may not be transferred or resold without registration under the Act
or pursuant to an exemption therefrom. In this connection, Investor represents
that Investor is familiar with Rule 144 under the Act, as presently in effect,
and understands the resale limitations imposed thereby and by the Act.
3.3.4 Disposition. Without in any way limiting the representations set
forth above, Investor agrees that until the Securities are sold pursuant to an
effective Registration Statement or an exemption from registration, they will
remain in the name of Investor and will not be transferred to or assigned to any
broker, dealer or depositary. Investor further agrees not to sell, transfer,
assign, or pledge the Securities (except for any bona fide pledge arrangement to
the extent that such pledge does not require registration under the Act or
unless an exemption from such registration is available and provided further
that if such pledge is realized upon, any transfer to the pledgee shall comply
with the requirements set forth herein), or to otherwise dispose of all or any
portion of the Securities unless and until:
(a) There is then in effect a registration statement under the
Act and any applicable state securities laws covering such proposed
disposition and such disposition is made in accordance with such
registration statement and in compliance with applicable prospectus
delivery requirements; or
(b) (i) Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a
statement of the circumstances surrounding the proposed disposition to
the extent relevant for determination of the availability of an
exemption from registration, and (ii) if reasonably requested by the
Company, Investor shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company, that such disposition
will not require registration of the Securities under the Act or state
securities laws. It is agreed that the Company will not require the
Investor to provide opinions of counsel for transactions made pursuant
to Rule 144 provided that Investor and Investor's broker, if necessary,
provide the Company with the necessary representations for counsel to
the Company to issue an opinion with respect to such transaction.
The Investor is entering into this Agreement for its own
account and the Investor has no present arrangement (whether or not legally
binding) at any time to sell the Common Stock to or through any person or
entity; provided, however, that by making the representations herein, the
Investor does not agree to hold the Common Stock for any minimum or other
specific term and reserves the right to dispose of the Common Stock at any time
in accordance with federal and state securities laws applicable to such
disposition.
3.4 Due Authorization.
3.4.1 Authority. The person executing this Investment Agreement, if
executing this Agreement in a representative or fiduciary capacity, has full
power and authority to execute and deliver this Agreement and each other
document included herein for which a signature is required in such capacity and
on behalf of the subscribing individual, partnership, trust, estate, corporation
or other entity for whom or which Investor is executing this Agreement. Investor
has reached the age of majority (if an individual) according to the laws of the
state in which he or she resides.
3.4.2 Due Authorization. If Investor is a corporation, Investor is duly
and validly organized, validly existing and in good tax and corporate standing
as a corporation under the laws of the jurisdiction of its incorporation with
full power and authority to purchase the Securities to be purchased by Investor
and to execute and deliver this Agreement.
3.4.3 Partnerships. If Investor is a partnership, the representations,
warranties, agreements and understandings set forth above are true with respect
to all partners of Investor (and if any such partner is itself a partnership,
all persons holding an interest in such partnership, directly or indirectly,
including through one or more partnerships), and the person executing this
Agreement has made due inquiry to determine the truthfulness of the
representations and warranties made hereby.
3.4.4 Representatives. If Investor is purchasing in a representative or
fiduciary capacity, the representations and warranties shall be deemed to have
been made on behalf of the person or persons for whom Investor is so purchasing.
4. Acknowledgments Investor is aware that:
4.1 Risks of Investment. Investor recognizes that an
investment in the Company involves substantial risks, including the potential
loss of Investor's entire investment herein. Investor recognizes that the
Disclosure Documents, this Agreement and the exhibits hereto do not purport to
contain all the information, which would be contained in a registration
statement under the Act;
4.2 No Government Approval. No federal or state agency has
passed upon the Securities, recommended or endorsed the Offering, or
made any finding or determination as to the fairness of this
transaction;
4.3 No Registration, Restrictions on Transfer. As of the date
of this Agreement, the Securities and any component thereof have not been
registered under the Act or any applicable state securities laws by reason of
exemptions from the registration requirements of the Act and such laws, and may
not be sold, pledged (except for any limited pledge in connection with a margin
account of Investor to the extent that such pledge does not require registration
under the Act or unless an exemption from such registration is available and
provided further that if such pledge is realized upon, any transfer to the
pledgee shall comply with the requirements set forth herein), assigned or
otherwise disposed of in the absence of an effective registration of the
Securities and any component thereof under the Act or unless an exemption from
such registration is available;
4.4 Restrictions on Transfer. Investor may not attempt to
sell, transfer, assign, pledge or otherwise dispose of all or any portion of the
Securities or any component thereof in the absence of either an effective
registration statement or an exemption from the registration requirements of the
Act and applicable state securities laws;
4.5 No Assurances of Registration. There can be no assurance
that any registration statement will become effective at the scheduled time, or
ever, or remain effective when required, and Investor acknowledges that it may
be required to bear the economic risk of Investor's investment for an indefinite
period of time;
4.6 Exempt Transaction. Investor understands that the
Securities are being offered and sold in reliance on specific exemptions from
the registration requirements of federal and state law and that the
representations, warranties, agreements, acknowledgments and understandings set
forth herein are being relied upon by the Company in determining the
applicability of such exemptions and the suitability of Investor to acquire such
Securities.
4.7 Legends. The certificates representing the Put Shares
shall not bear a Restrictive Legend. The certificates representing the Warrant
Shares shall not bear a Restrictive Legend unless they are issued at a time when
the Registration Statement is not effective for resale. It is understood that
the certificates evidencing any Warrant Shares issued at a time when the
Registration Statement is not effective for resale, subject to legend removal
under the terms of Section 6.9 below, shall bear the following legend (the
"Legend"):
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, or applicable state securities
laws, nor the securities laws of any other jurisdiction. They may not
be sold or transferred in the absence of an effective registration
statement under those securities laws or pursuant to an exemption
therefrom."
5. Representations and Warranties of the Company . The Company hereby
makes the following representations and warranties to Investor (which shall be
true at the signing of this Agreement, and as of any such later date as
contemplated hereunder) and agrees with Investor that, except as set forth in
the Schedule of Exceptions attached hereto as Exhibit C:
5.1 Organization, Good Standing, and Qualification. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, USA and has all requisite corporate
power and authority to carry on its business as now conducted and as proposed to
be conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify would have a
material adverse effect on the business or properties of the Company and its
subsidiaries taken as a whole. The Company is not the subject of any pending,
threatened or, to its knowledge, contemplated investigation or administrative or
legal proceeding (a "Proceeding") by the Internal Revenue Service, the taxing
authorities of any state or local jurisdiction, or the Securities and Exchange
Commission, The National Association of Securities Dealer, Inc., The Nasdaq
Stock Market, Inc. or any state securities commission, or any other governmental
entity, which have not been disclosed in the Disclosure Documents. None of the
disclosed Proceedings, if any, will have a material adverse effect upon the
Company or the market for the Common Stock. The Company has no subsidiaries.
5.2 Corporate Condition. The Company's condition is, in all
material respects, as described in the Disclosure Documents (as further set
forth in any subsequently filed Disclosure Documents, if applicable), except for
changes in the ordinary course of business and normal year-end adjustments that
are not, in the aggregate, materially adverse to the Company. Except for
continuing losses, there have been no material adverse changes to the Company's
business, financial condition, or prospects since the dates of such Disclosure
Documents. The financial statements as contained in the Company's Form 10 have
been prepared in accordance with generally accepted accounting principles,
consistently applied (except as otherwise permitted by Regulation S-X of the
Exchange Act), subject, in the case of unaudited interim financial statements,
to customary year end adjustments and the absence of certain footnotes, and
fairly present the financial condition of the Company as of the dates of the
balance sheets included therein and the consolidated results of its operations
and cash flows for the periods then ended,. Without limiting the foregoing,
there are no material liabilities, contingent or actual, that are not disclosed
in the Disclosure Documents (other than liabilities incurred by the Company in
the ordinary course of its business, consistent with its past practice, after
the period covered by the Disclosure Documents). The Company has paid all
material taxes that are due, except for taxes that it reasonably disputes. There
is no material claim, litigation, or administrative proceeding pending or, to
the best of the Company's knowledge, threatened against the Company, except as
disclosed in the Disclosure Documents. This Agreement and the Disclosure
Documents do not contain any untrue statement of a material fact and do not omit
to state any material fact required to be stated therein or herein necessary to
make the statements contained therein or herein not misleading in the light of
the circumstances under which they were made. No event or circumstance exists
relating to the Company which, under applicable law, requires public disclosure
but which has not been so publicly announced or disclosed.
5.3 Authorization. All corporate action on the part of the
Company by its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement, the performance of all
obligations of the Company hereunder and the authorization, issuance and
delivery of the Common Stock being sold hereunder and the issuance (and/or the
reservation for issuance) of the Warrants and the Warrant Shares have been
taken, and this Agreement and the Registration Rights Agreement constitute valid
and legally binding obligations of the Company, enforceable in accordance with
their terms, except insofar as the enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, or other similar laws affecting
creditors' rights generally or by principles governing the availability of
equitable remedies. The Company has obtained all consents and approvals required
for it to execute, deliver and perform each agreement referenced in the previous
sentence.
5.4 Valid Issuance of Common Stock. The Common Stock and the
Warrants, when issued, sold and delivered in accordance with the terms hereof,
for the consideration expressed herein, will be validly issued, fully paid and
nonassessable and, based in part upon the representations of Investor in this
Agreement, will be issued in compliance with all applicable U.S. federal and
state securities laws. The Warrant Shares, when issued in accordance with the
terms of the Warrants, shall be duly and validly issued and outstanding, fully
paid and nonassessable, and based in part on the representations and warranties
of Investor, will be issued in compliance with all applicable U.S. federal and
state securities laws. The Put Shares, the Warrants and the Warrant Shares will
be issued free of any preemptive rights.
5.5 Compliance with Other Instruments. The Company is not in
violation or default of any provisions of its Certificate of Incorporation or
Bylaws, each as amended and in effect on and as of the date of the Agreement, or
of any material provision of any material instrument or material contract to
which it is a party or by which it is bound or of any provision of any federal
or state judgment, writ, decree, order, statute, rule or governmental regulation
applicable to the Company, which would have a material adverse effect on the
Company's business or prospects, or on the performance of its obligations under
this Agreement or the Registration Rights Agreement. The execution, delivery and
performance of this Agreement and the other agreements entered into in
conjunction with the Offering and the consummation of the transactions
contemplated hereby and thereby will not (a) result in any such violation or be
in conflict with or constitute, with or without the passage of time and giving
of notice, either a default under any such provision, instrument or contract or
an event which results in the creation of any lien, charge or encumbrance upon
any assets of the Company, which would have a material adverse effect on the
Company's business or prospects, or on the performance of its obligations under
this Agreement, the Registration Rights Agreement, (b) violate the Company's
Certificate of Incorporation or By-Laws or (c) violate any statute, rule or
governmental regulation applicable to the Company which violation would have a
material adverse effect on the Company's business or prospects.
5.6 Reporting Company. The Company will use its best efforts
to become subject to the reporting requirements of the Exchange Act, and to have
a class of securities registered under Section 12 of the Exchange Act not later
than six (6) months from the date hereof, and shall file all reports required by
the Exchange Act following the date the Company first becomes subject to such
reporting obligations. The Company undertakes to furnish Investor with copies of
such reports as may be reasonably requested by Investor prior to consummation of
this Offering and thereafter, to make such reports available, for the full term
of this Agreement, including any extensions thereof, and for as long as Investor
holds the Securities. The Common Stock is duly listed on the O.T.C. Bulletin
Board. The Company is not in violation of the listing requirements of the O.T.C.
Bulletin Board and does not reasonably anticipate that the Common Stock will be
delisted by the O.T.C. Bulletin Board for the foreseeable future. The Company
has filed all reports required under the Exchange Act. The Company has not
furnished to the Investor any material nonpublic information concerning the
Company.
5.7 Capitalization. The capitalization of the Company as of
June 3, 1999, is, and the capitalization as of the Closing, subject to exercise
of any outstanding warrants and/or exercise of any outstanding stock options,
after taking into account the offering of the Securities contemplated by this
Agreement and all other share issuances occurring prior to this Offering, will
be, as set forth in the Capitalization Schedule as set forth in Exhibit K. There
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Securities. Except as disclosed in
the Capitalization Schedule, as of the date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe for, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable 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, and (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 Act
(except the Registration Rights Agreement).
5.8 Intellectual Property. The Company has valid, unrestricted
and exclusive ownership of or rights to use the patents, trademarks, trademark
registrations, trade names, copyrights, know-how, technology and other
intellectual property necessary to the conduct of its business. Exhibit M lists
all patents, trademarks, trademark registrations, trade names and copyrights of
the Company. The Company has granted such licenses or has assigned or otherwise
transferred a portion of (or all of) such valid, unrestricted and exclusive
patents, trademarks, trademark registrations, trade names, copyrights, know-how,
technology and other intellectual property necessary to the conduct of its
business as set forth in Exhibit M. The Company has been granted licenses,
know-how, technology and/or other intellectual property necessary to the conduct
of its business as set forth in Exhibit M. To the best of the Company's
knowledge after due inquiry, the Company is not infringing on the intellectual
property rights of any third party, nor is any third party infringing on the
Company's intellectual property rights. There are no restrictions in any
agreements, licenses, franchises, or other instruments that preclude the Company
from engaging in its business as presently conducted.
5.9 Use of Proceeds. As of the date hereof, the Company
expects to use the proceeds from this Offering (less fees and expenses) for the
purposes and in the approximate amounts set forth on the Use of Proceeds
Schedule set forth as Exhibit L hereto. These purposes and amounts are estimates
and are subject to change without notice to any Investor.
5.10 No Rights of Participation. No person or entity,
including, but not limited to, current or former stockholders of the Company,
underwriters, brokers, agents or other third parties, has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the financing contemplated by this Agreement which has not been
waived.
5.11 Company Acknowledgment. The Company hereby acknowledges
that Investor may elect to hold the Securities for various periods of time, as
permitted by the terms of this Agreement, the Warrants, and other agreements
contemplated hereby, and the Company further acknowledges that Investor has made
no representations or warranties, either written or oral, as to how long the
Securities will be held by Investor or regarding Investor's trading history or
investment strategies.
5.12 No Advance Regulatory Approval. The Company acknowledges
that this Investment Agreement, the transaction contemplated hereby and the
Registration Statement contemplated hereby have not been approved by the SEC, or
any other regulatory body and there is no guarantee that this Investment
Agreement, the transaction contemplated hereby and the Registration Statement
contemplated hereby will ever be approved by the SEC or any other regulatory
body. The Company is relying on its own analysis and is not relying on any
representation by Investor that either this Investment Agreement, the
transaction contemplated hereby or the Registration Statement contemplated
hereby has been or will be approved by the SEC or other appropriate regulatory
body.
5.13 Underwriter's Fees and Rights of First Refusal. The
Company is not obligated to pay any compensation or other fees, costs or related
expenditures in cash or securities to any underwriter, broker, agent or other
representative other than the Investor in connection with this Offering.
5.14 Availability of Suitable Form for Registration. The
Company is currently eligible and agrees to maintain its eligibility to register
the resale of its Common Stock on a registration statement on a suitable form
under the Act.
5.15 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 of the Company's securities or
solicited any offers to buy any security under circumstances that would prevent
the parties hereto from consummating the transactions contemplated hereby
pursuant to an exemption from registration under Regulation D of the Act or
would require the issuance of any other securities to be integrated with this
Offering under the Rules of Nasdaq. The Company has not engaged in any form of
general solicitation or advertising in connection with the offering of the
Common Stock or the Warrants.
5.16 [Intentionally Left Blank].
5.17 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 its
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.
5.18 Key Employees. Each "Key Employee" (as defined in Exhibit
N) is currently serving the Company in the capacity disclosed in Exhibit N. No
Key Employee, to the best knowledge of the Company and its subsidiaries, is, or
is now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each Key Employee does not subject the
Company or any of its subsidiaries to any liability with respect to any of the
foregoing matters. No Key Employee has, to the best knowledge of the Company and
its subsidiaries, any intention to terminate his employment with, or services
to, the Company or any of its subsidiaries.
5.19 Representations Correct. The foregoing representations,
warranties and agreements are true, correct and complete in all material
respects, and shall survive any Put Closing and the issuance of the shares of
Common Stock thereby.
5.20 Tax Status. The Company has made or filed all federal and
state 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 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 as set aside on its books provision reasonably
adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. 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.
5.21 Transactions With Affiliates. Except as set forth in the
Disclosure Documents, none of the officers, directors, or employees of the
Company is presently a party to any transaction with the Company (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.
5.22 Application of Takeover Protections. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination or other
similar anti-takeover provision under Delaware law which is or could become
applicable to the Investor as a result of the transactions contemplated by this
Agreement, including, without limitation, the issuance of the Common Stock, any
exercise of the Warrants and ownership of the Common Shares and Warrant Shares.
The Company has not adopted and will not adopt any "poison pill" provision that
will be applicable to Investor as a result of transactions contemplated by this
Agreement.
5.23 Other Agreements. The Company has not, directly or
indirectly, made any agreements with the Investor under a subscription in the
form of this Agreement for the purchase of Common Stock, relating to the terms
or conditions of the transactions contemplated hereby or thereby except as
expressly set forth herein, respectively, or in exhibits hereto or thereto.
5.24 Major Transactions. There are no other Major
Transactions currently pending or contemplated by the Company.
5.25 Financings. There are no other financings currently
pending or contemplated by the Company.
5.26 Shareholder Authorization. The Company shall, at its next
annual shareholder meeting following its listing on either the Nasdaq Small Cap
Market or the Nasdaq National Market, or at a special meeting to be held as soon
as practicable thereafter, use its best efforts to obtain approval of its
shareholders to (i) authorize the issuance of the full number of shares of
Common Stock which would be issuable under this Agreement and eliminate any
prohibitions under applicable law or the rules or regulations of any stock
exchange, interdealer quotation system or other self-regulatory organization
with jurisdiction over the Company or any of its securities with respect to the
Company's ability to issue shares of Common Stock in excess of the Cap Amount
(such approvals being the "20% Approval") and (ii) the increase in the number of
authorized shares of Common Stock of the Company (the "Share Authorization
Increase Approval") such that at least 25,000,000 shares can be reserved for
this Offering. In connection with such shareholder vote, the Company shall use
its best efforts to cause all officers and directors of the Company to promptly
enter into irrevocable agreements to vote all of their shares in favor of
eliminating such prohibitions. As soon as practicable after the 20% Approval and
the Share Authorization Increase Approval, the Company agrees to use its best
efforts to reserve 25,000,000 shares of Common Stock for issuance under this
Agreement.
6. Covenants of the Company
6.1 Independent Auditors. The Company shall, until at least
the Termination Date, maintain as its independent auditors an accounting firm
authorized to practice before the SEC.
6.2 Corporate Existence and Taxes. The Company shall, until at
least the Termination Date, maintain its corporate existence in good standing
and, once it becomes a "Reporting Issuer" (defined as a Company which files
periodic reports under the Exchange Act), remain a Reporting Issuer (provided,
however, that the foregoing covenant shall not prevent the Company from entering
into any merger or corporate reorganization as long as the surviving entity in
such transaction, if not the Company, assumes the Company's obligations with
respect to the Common Stock and has Common Stock listed for trading on a stock
exchange or on Nasdaq and is a Reporting Issuer) and shall pay all its taxes
when due except for taxes which the Company disputes.
6.3 Registration Rights. The Company will enter into a
registration rights agreement covering the resale of the Common Shares and the
Warrant Shares substantially in the form of the Registration Rights Agreement
attached as Exhibit A.
6.4 [Intentionally Omitted].
6.5 Asset Transfers. The Company shall not (i) transfer, sell,
convey or otherwise dispose of any of its material assets to any Subsidiary
except for a cash or cash equivalent consideration and for a proper business
purpose or (ii) transfer, sell, convey or otherwise dispose of any of its
material assets to any Affiliate, as defined below, during the Term of this
Agreement. For purposes hereof, "Affiliate" shall mean any officer of the
Company, director of the Company or owner of twenty percent (20%) or more of the
Common Stock or other securities of the Company.
6.6 Capital Raising Limitations; Rights of First Refusal.
6.6.1 Capital Raising Limitations.
During the period from the date of this Agreement until the the Termination
Date, the Company shall not issue or sell, or agree to issue or sell Equity
Securities (as defined below), for cash in private capital raising transactions
without obtaining the prior written approval of the Investor of this Offering
(the limitations referred to in this subsection 6.6.1 are collectively referred
to as the "Capital Raising Limitations"), except that, provided that the Company
has completed at least one Put during each Calendar Month since the Effective
Date, the Company may issue and sell Equity Securities without the Investor's
written approval to the extent that the aggregate sum of all such placements of
Equity Securities do not exceed the difference of (x) $500,000 multiplied by the
number of Puts that the Company has completed since the Effective Date, minus
(y) the sum of the Individual Put Limits for the Puts that the Company has
completed since the Effective Date ((x) minus (y) being referred to hereafter as
the "Equity Line Shortfall").
For purposes hereof, the following shall be collectively
referred to herein as, the "Equity Securities": (i) Common Stock or any other
equity securities, (ii) any debt or equity securities which are convertible
into, exercisable or exchangeable for, or carry the right to receive additional
shares of Common Stock or other equity securities, or (iii) any securities of
the Company pursuant to an equity line structure or format similar in nature to
this Offering.
6.6.2 Investor's Right of First Refusal.
For any private capital raising transactions of Equity Securities which close
after the date hereof and on or prior to the date that is six (6) months after
the Termination Date of this Agreement, not including any warrants issued in
conjunction with this Investment Agreement, the Company agrees to deliver to
Investor, at least ten (10) days prior to the closing of such transaction,
written notice describing the proposed transaction, including the terms and
conditions thereof, and providing the Investor and its affiliates an option
during the ten (10) day period following delivery of such notice to purchase the
securities being offered in such transaction on the same terms as contemplated
by such transaction.
6.6.3 Exceptions to Rights of First Refusal.
Notwithstanding the above, the Rights of First Refusal shall not apply to any
transaction involving issuances of securities in connection with a merger,
consolidation, acquisition or sale 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 or license by the Company or exercise of options by employees,
consultants or directors.
6.7 Financial 00-XXX Xxxxxxxxxx, Etc. and Current Reports on
Form 8-K. Once the Company becomes a "reporting company" within the meaning of
the Exchange Act, the Company shall deliver to the Investor copies of its annual
reports on Form 10-KSB, and quarterly reports on Form 10-QSB and shall deliver
to the Investor current reports on Form 8-K within two (2) days of filing for
the Term of this Agreement.
6.8 Opinion of Counsel. Investor shall, concurrent with the
purchase of the Common Stock and accompanying Warrants pursuant to this
Agreement, receive an opinion letter from the Company's legal counsel, in the
form attached as Exhibit B or in such form as agreed upon by the parties, as to
the Investment Commitment Closing and in the form attached as Exhibit I or in
such form as agreed upon by the parties, as to any Put Closing.
6.9 Removal of Legend. If the certificates representing any
Securities are issued with a restrictive Legend in accordance with the terms of
this Agreement, the Legend shall be removed and the Company shall issue a
certificate without such Legend to the holder of any Security upon which it is
stamped, and a certificate for a security shall be originally issued without the
Legend, if (a) the sale of such Security is registered under the Act, 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 (the
reasonable cost of which shall be borne by the Investor), to the effect that a
public sale or transfer of such Security may be made without registration under
the Act, or (c) such holder provides the Company with reasonable assurances that
such Security can be sold pursuant to Rule 144. Each Investor agrees to sell all
Securities, including those represented by a certificate(s) from which the
Legend has been removed, or which were originally issued without the Legend,
pursuant to an effective registration statement and to deliver a prospectus in
connection with such sale or in compliance with an exemption from the
registration requirements of the Act.
6.10 Listing. Subject to the remainder of this Section 6.10,
the Company shall ensure that its shares of Common Stock (including all Warrant
Shares) are listed and available for trading on the O.T.C. Bulletin Board.
Thereafter, the Company shall (i) use its best efforts to continue the listing
and trading of its Common Stock on the O.T.C. Bulletin Board or to become
eligible for and listed and available for trading on the Nasdaq Small Cap
Market, the NMS, or the New York Stock Exchange ("NYSE"); and (ii) comply in all
material respects with the Company's reporting, filing and other obligations
under the By-Laws or rules of the National Association of Securities Dealers
("NASD") and such exchanges, as applicable.
6.11 The Company's Instructions to Transfer Agent. The Company
will instruct the Transfer Agent of the Common Stock, by delivering instructions
in the form of Exhibit T hereto, to issue certificates, registered in the name
of each Investor or its nominee, for the Put Shares and Warrant Shares in such
amounts as specified from time to time by the Company upon any exercise by the
Company of a Put and/or exercise of the Warrants by the holder thereof. Such
certificates shall not bear a Legend unless issuance with a Legend is permitted
by the terms of this Agreement and Legend removal is not permitted by Section
6.9 hereof and the Company shall cause the Transfer Agent to issue such
certificates without a Legend. Nothing in this Section shall affect in any way
Investor's obligations and agreement set forth in Sections 3.3.3 or 3.3.4 hereof
to resell the Securities pursuant to an effective registration statement and to
deliver a prospectus in connection with such sale or in compliance with an
exemption from the registration requirements of applicable securities laws. If
(a) an Investor provides the Company with an opinion of counsel, which opinion
of counsel 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
registration or (b) an Investor transfers Securities, pursuant to Rule 144, to
an affiliate which is an accredited investor, the Company shall permit the
transfer, and, in the case of Put Shares and Warrant Shares, promptly instruct
its transfer agent to issue one or more certificates in such name and in such
denomination as specified by such Investor. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to an
Investor by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 6.11 will be inadequate and agrees,
in the event of a breach or threatened breach by the Company of the provisions
of this Section 6.11, that an Investor shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.
6.12 Stockholder 20% Approval. Prior to the closing of any Put
that would cause the Aggregate Issued Shares to exceed the Cap Amount, the
Company shall obtain approval of its stockholders to authorize (i) the issuance
of the full number of shares of Common Stock which would be issuable pursuant to
this Agreement but for the Cap Amount and eliminate any prohibitions under
applicable law or the rules or regulations of any stock exchange, interdealer
quotation system or other self-regulatory organization with jurisdiction over
the Company or any of its securities with respect to the Company's ability to
issue shares of Common Stock in excess of the Cap Amount (such approvals being
the "Stockholder 20% Approval").
6.13 Press Release. The Company agrees that the Investor shall
have the right to review and comment upon any press release issued by the
Company in connection with the Offering which approval shall not be unreasonably
withheld by Investor.
6.14 Change in Law or Policy. In the event of a change in law,
or policy of the SEC, as evidenced by a No-Action letter or other written
statements of the SEC or the NASD which causes the Investor to be unable to
perform its obligations hereunder, this Agreement shall be automatically
terminated and no further Commitment Fees shall be due.
7. Investor Covenant/Miscellaneous.
7.1 Representations and Warranties Survive the Closing;
Severability. Investor's and the Company's representations and warranties shall
survive the Investment Date and any Put Closing contemplated by this Agreement
notwithstanding any due diligence investigation made by or on behalf of the
party seeking to rely thereon. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, or is altered by a term required by the Securities
Exchange Commission to be included in the Registration Statement, this Agreement
shall continue in full force and effect without said provision; provided that if
the removal of such provision materially changes the economic benefit of this
Agreement to the Investor, the Investor, at its option, may terminate this
Agreement or require that other terms of the Agreement be amended to compensate
for such material economic changes.
7.2 Successors and Assigns. This Agreement shall not be
assignable without the Company's written consent, If assigned, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement. Investor may assign Investor's rights
hereunder, in connection with any private sale of the Common Stock of such
Investor, so long as, as a condition precedent to such transfer, the transferee
executes an acknowledgment agreeing to be bound by the applicable provisions of
this Agreement in a form acceptable to the Company and provides an original copy
of such acknowledgment to the Company.
7.3 Execution in Counterparts Permitted. This Agreement may be
executed in any number of counterparts, each of which shall be enforceable
against the parties actually executing such counterparts, and all of which
together shall constitute one (1) instrument.
7.4 Titles and Subtitles; Gender. The titles and subtitles
used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement. The use in this
Agreement of a masculine, feminine or neither pronoun shall be deemed to include
a reference to the others.
7.5 Written Notices, Etc. Any notice, demand or request
required or permitted to be given by the Company or Investor pursuant to the
terms of this Agreement shall be in writing and shall be deemed given when
delivered personally, or by facsimile or upon receipt if by overnight or two (2)
day courier, addressed to the parties at the addresses and/or facsimile
telephone number of the parties set forth at the end of this Agreement or such
other address as a party may request by notifying the other in writing;
provided, however, that in order for any notice to be effective as to the
Investor such notice shall be delivered and sent, as specified herein, to all
the addresses and facsimile telephone numbers of the Investor set forth at the
end of this Agreement or such other address and/or facsimile telephone number as
Investor may request in writing.
7.6 Expenses. Except as set forth in the Registration Rights
Agreement, each of the Company and Investor shall pay all costs and expenses
that it respectively incurs, with respect to the negotiation, execution,
delivery and performance of this Agreement.
7.7 Entire Agreement; Written Amendments Required. This
Agreement, including the Exhibits attached hereto, the Common Stock
certificates, the Warrants, the Registration Rights Agreement, and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and
thereof, and no party shall be liable or bound to any other party in any manner
by any warranties, representations or covenants, whether oral, written, or
otherwise except as specifically set forth herein or therein. Except as
expressly provided herein, neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought.
7.8 Actions at Law or Equity; Jurisdiction and Venue. The
parties acknowledge that any and all actions, whether at law or at equity, and
whether or not said actions are based upon this Agreement between the parties
hereto, shall be filed in any state or federal court sitting in Atlanta,
Georgia. Georgia law shall govern both the proceeding as well as the
interpretation and construction of the Transaction Documents and the transaction
as a whole. In any litigation between the parties hereto, the prevailing party,
as found by the court, shall be entitled to an award of all attorney's fees and
costs of court. Should the court refuse to find a prevailing party, each party
shall bear its own legal fees and costs.
8. Subscription and Wiring Instructions; Irrevocability.
8.1 Subscription
(a) Wire transfer of Subscription Funds. Investor shall
deliver Put Dollar Amounts (as payment towards any
Put Share Price) by wire transfer, to the Company
pursuant to a wire instruction letter to be provided
by the Company, and signed by the Company.
(b) Irrevocable Subscription. Investor hereby
acknowledges and agrees, subject to the provisions of
any applicable laws providing for the refund of
subscription amounts submitted by Investor, that this
Agreement is irrevocable and that Investor is not
entitled to cancel, terminate or revoke this
Agreement or any other agreements executed by such
Investor and delivered pursuant hereto, and that this
Agreement and such other agreements shall survive the
death or disability of such Investor and shall be
binding upon and inure to the benefit of the parties
and their heirs, executors, administrators,
successors, legal representatives and assigns. If the
Securities subscribed for are to be owned by more
than one person, the obligations of all such owners
under this Agreement shall be joint and several, and
the agreements, representations, warranties and
acknowledgments herein contained shall be deemed to
be made by and be binding upon each such person and
his heirs, executors, administrators, successors,
legal representatives and assigns.
8.2 Acceptance of Subscription. Ownership of the number of
securities purchased hereby will pass to Investor upon the Warrant Closing or
any Put Closing.
9. Indemnification.
In consideration of the Investor's execution and delivery of the
Investment Agreement, the Registration Rights Agreement and the Warrants (the
"Transaction Documents") and acquiring the Securities thereunder and in addition
to all of the Company's other obligations under the Transaction Documents, the
Company shall defend, protect, indemnify and hold harmless Investor and all of
its stockholders, officers, directors, employees and direct or indirect
investors and any of the foregoing person's agents, members, partners or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorney's fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
documents contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby, or
(c) any cause of action, suit or claim, derivative or otherwise, by any
stockholder of the Company based on a breach or alleged breach by the Company or
any of its officers or directors of their fiduciary or other obligations to the
stockholders of the Company.
To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which it
would be required to make if such foregoing undertaking was enforceable which is
permissible under applicable law.
Promptly after receipt by an Indemnified Party of notice of the
commencement of any action pursuant to which indemnification may be sought, such
Indemnified Party will, if a claim in respect thereof is to be made against the
other party (hereinafter "Indemnitor") under this Section 9, deliver to the
Indemnitor a written notice of the commencement thereof and the Indemnitor shall
have the right to participate in and to assume the defense thereof with counsel
reasonably selected by the Indemnitor, provided, however, that an Indemnified
Party shall have the right to retain its own counsel, with the reasonably
incurred fees and expenses of such counsel to be paid by the Indemnitor, if
representation of such Indemnified Party by the counsel retained by the
Indemnitor would be inappropriate due to actual or potential conflicts of
interest between such Indemnified Party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
Indemnitor within a reasonable time of the commencement of any such action, if
prejudicial to the Indemnitor's ability to defend such action, shall relieve the
Indemnitor of any liability to the Indemnified Party under this Section 9, but
the omission to so deliver written notice to the Indemnitor will not relieve it
of any liability that it may have to any Indemnified Party other than under this
Section 9 to the extent it is prejudicial.
[INTENTIONALLY LEFT BLANK]
10. Accredited Investor. Investor is an "accredited investor" because
(check all applicable boxes):
(a) [ ] it is an organization described in Section
501(c)(3) of the Internal Revenue Code, or a
corporation, limited duration company, limited
liability company, business trust, or partnership not
formed for the specific purpose of acquiring the
securities offered, with total assets in excess of
$5,000,000.
(b) [ ] any trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of
acquiring the securities offered, whose purchase is
directed by a sophisticated person who has such
knowledge and experience in financial and business
matters that he is capable of evaluating the merits
and risks of the prospective investment.
(c) [ ] a natural person, who
[ ] is a director, executive officer or general partner
of the issuer of the securities being offered or sold
or a director, executive officer or general partner
of a general partner of that issuer.
[ ] has an individual net worth, or joint net worth
with that person's spouse, at the time of his
purchase exceeding $1,000,000.
[ ] had an individual income in excess of $200,000 in
each of the two most recent years or joint income
with that person's spouse in excess of $300,000 in
each of those years and has a reasonable expectation
of reaching the same income level in the current
year.
(d) [ ] an entity each equity owner of which is an entity
described in a - b above or is an individual who
could check one (1) of the last three (3) boxes under
subparagraph (c) above.
(e) [ ] other [specify]
-----------------------------------------------------
The undersigned hereby subscribes the Maximum Offering Amount and
acknowledges that this Agreement and the subscription represented hereby shall
not be effective unless accepted by the Company as indicated below.
IN WITNESS WHEREOF, the undersigned Investor does represent and certify
under penalty of perjury that the foregoing statements are true and correct and
that Investor by the following signature(s) executed this Agreement.
Dated this 3rd day of June, 1999.
------------------------------ ------------------------------------
Your Signature PRINT EXACT NAME IN WHICH YOU WANT
THE SECURITIES TO BE REGISTERED
SECURITY DELIVERY INSTRUCTIONS:
------------------------------ ------------------------------------
Name: Please Print Please type or print address where your
security is to be delivered
------------------------------ ATTN:
-------------------------------
Title/Representative Capacity
(if applicable)
------------------------------ ------------------------------------
Name of Company You Represent
(if applicable) Street Address
----------------------------- ------------------------------------
Place of Execution of this Agreement City, State or Province, Country,
Offshore Postal Code
NOTICE DELIVERY INSTRUCTIONS: WITH A COPY DELIVERED TO:
----------------------------- ------------------------------------
Please print address where any Notice Please print address where Copy is
is to be delivered to be delivered
ATTN: ______________________ ATTN: ______________________________
---------------------------- ------------------------------------
Xxxxxx Xxxxxxx Xxxxxx Xxxxxxx
-------------------------------------------
-------------------------------------------
City, State or Province, Country, City, State or Country, Offshore Postal
Offshore Postal Code Code
Telephone: _____________________ Telephone: ___________________________
Facsimile: _____________________ Facsimile: ___________________________
Facsimile: _____________________ Facsimile: ___________________________
THIS AGREEMENT IS ACCEPTED BY THE COMPANY IN THE AMOUNT OF THE MAXIMUM OFFERING
AMOUNT ON THE 3rd DAY OF JUNE, 1999.
----
ALOTTAFUN!, INC.
By:
-------------------------
Xxxxxxx Xxxxxx, CEO
Address:
Attn: Xxxxxxx Xxxxxx
ALOTTAFUN!, INC.
000 X. Xxxx Xx., #000
Xxxx Xxxx, XX 00000
Telephone (000) 000-0000
Facsimile (000) 000-0000
ADVANCE PUT NOTICE
ALOTTAFUN!, INC. (the "Company") hereby intends, subject to the Individual Put
Limit (as defined in the Investment Agreement), to elect to exercise a Put to
sell the number of shares of Common Stock of the Company specified below, to
_____________________________, the Investor, as of the Intended Put Date written
below, all pursuant to that certain Investment Agreement (the "Investment
Agreement") by and between the Company and Xxxxxx Private Equity, LLC dated on
or about June 3, 1999.
Date of Advance Put Notice: _________________
Intended Put Date :__________________________
Intended Put Share Amount: __________________
Company Designation Maximum Put Dollar Amount (Optional):
----------------------------------------.
Company Designation Minimum Put Share Price (Optional):
----------------------------------------.
ALOTTAFUN!, INC.
By:
------------------------------
Xxxxxxx Xxxxxx, CEO
Address:
ALOTTAFUN!, INC.
000 X. Xxxx Xx., #000
Xxxx Xxxx, XX 00000
Telephone (000) 000-0000
Facsimile (000) 000-0000
EXHIBIT E
CONFIRMATION of ADVANCE PUT NOTICE
_________________________________, the Investor, hereby confirms receipt of
ALOTTAFUN!, INC.'s (the "Company") Advance Put Notice on the Advance Put Date
written below, and its intention to elect to exercise a Put to sell shares of
common stock ("Intended Put Share Amount") of the Company to the Investor, as of
the intended Put Date written below, all pursuant to that certain Investment
Agreement (the "Investment Agreement") by and between the Company and Xxxxxx
Private Equity, LLC dated on or about June 3, 1999.
Date of Confirmation: ____________________
Date of Advance Put Notice: ______________
Intended Put Date: _______________________
Intended Put Share Amount: _______________
Company Designation Maximum Put Dollar Amount (Optional):
----------------------------------------.
Company Designation Minimum Put Share Price (Optional):
----------------------------------------.
INVESTOR(S)
-----------------------------------
Investor's Name
By: _______________________________
(Signature)
Address:____________________________________
------------------------------------
------------------------------------
Telephone No.: ___________________________________
Facsimile No.: __________________________________
EXHIBIT F
PUT NOTICE
ALOTTAFUN!, INC. (the "Company") hereby elects to exercise a Put to sell shares
of common stock ("Common Stock") of the Company to
_____________________________, the Investor, as of the Put Date, at the Put
Share Price and for the number of Put Shares written below, all pursuant to that
certain Investment Agreement (the "Investment Agreement") by and between the
Company and Xxxxxx Private Equity, LLC dated on or about June 3, 1999.
Put Date :_________________
Intended Put Share Amount (from Advance Put Notice):_________________
Common Shares
Company Designation Maximum Put Dollar Amount (Optional):
----------------------------------------.
Company Designation Minimum Put Share Price (Optional):
----------------------------------------.
Note: Capitalized terms shall have the meanings ascribed to them in this
Investment Agreement.
ALOTTAFUN!, INC.
By:
-----------------------
Xxxxxxx Xxxxxx, CEO
Address:
ALOTTAFUN!, INC.
000 X. Xxxx Xx., #000
Xxxx Xxxx, XX 00000
Telephone (000) 000-0000
Facsimile (000) 000-0000
EXHIBIT G
CONFIRMATION of PUT NOTICE
_________________________________, the Investor, hereby confirms receipt of
Alottafun!, Inc. (the "Company") Put Notice and election to exercise a Put to
sell ___________________________ shares of common stock ("Common Stock") of the
Company to Investor, as of the Put Date, all pursuant to that certain Investment
Agreement (the "Investment Agreement") by and between the Company and Xxxxxx
Private Equity, LLC dated on or about June 3, 1999.
Date of this Confirmation: ________________
Put Date :_________________
Number of Put Shares of
Common Stock to be Issued: _____________
Volume Evaluation Period: _____ Business Days
Purchase Period: _____ Business Days
INVESTOR(S)
-----------------------------------
Investor's Name
By: _________________________________
(Signature)
Address:____________________________________
------------------------------------
------------------------------------
Telephone No.: ___________________________________
Facsimile No.: ___________________________________
EXHIBIT H
PURCHASE NOTICE
_________________________________, the Investor, pursuant to Alottafun!, Inc.
(the "Company") Put Notice and election to exercise a Put to sell shares of
common stock ("Common Stock") of the Company to Investor, as of the Put Date set
forth below, all pursuant to that certain Investment Agreement (the "Investment
Agreement") by and between the Company and Xxxxxx Private Equity, LLC dated on
or about June 3, 1999, exercises its obligation to purchase the number of Put
Shares as set forth below.
Date of this Purchase Notice: ________________
Put Date for Applicable Put:_________________
Market Price for the Put Shares Being Purchased
under this Purchase Notice: ________.
(Explanation: _____________________________).
Put Share Price for the Put Shares Being Purchased
under this Purchase Notice: ________.
Number of Put Shares being Purchased Pursuant to
this Notice: _____________
Total Aggregate Number of Put Shares Purchased
under this Put to Date, Inclusive of the Put Shares
Being Purchased in this Notice: ____________
Total Aggregate Put Dollar Amount of Put Shares
Purchased under this Put to Date, Inclusive of the Put
Shares Being Purchased in this Notice:
------------.
Maximum Put Dollar Amount: $_______________.
(As specified by the Company in the Put Notice, if
applicable, or $2 million, whichever is less).
INVESTOR(S)
-----------------------------------
Investor's Name
By: _________________________________
(Signature)
Address:____________________________________
------------------------------------
Telephone No.: ___________________________________
Facsimile No.: ___________________________________
ALOTTAFUN!, INC.
By:
----------------------
Xxxxxxx Xxxxxx, CEO
Address:
ALOTTAFUN!, INC.
000 X. Xxxx Xx., #000
Xxxx Xxxx, XX 00000
Telephone (000) 000-0000
Facsimile (000) 000-0000
EXHIBIT P
PUT CANCELLATION NOTICE
ALOTTAFUN!, INC. (the "Company") hereby cancels the Put specified below,
pursuant to that certain Investment Agreement (the "Investment Agreement") by
and between the Company and Xxxxxx Private Equity, LLC dated on or about June 3,
1999, as of the close of trading on the date specified below (the "Cancellation
Date," which date must be on or after the date that this notice is delivered to
the Investor), provided that such cancellation shall not apply to the number of
shares of Common Stock with respect to which the Investor has delivered a
Purchase Notice by 11:59 PM, New York City time, on the date hereof.:
Cancellation Date: _____________________
Put Date of Put Being Canceled: __________
Number of Shares Put on Put Date: _________
Reason for Cancellation (check one):
[ ] Material Facts, Ineffective Registration Period.
[ ] Delisting Event
The Company understands that, by canceling this Put, it must give twenty (20)
Business Days advance written notice to the Investor before effecting the next
Put.
ALOTTAFUN!, INC.
By:
-----------------------
Xxxxxxx Xxxxxx, CEO
Address:
ALOTTAFUN!, INC.
000 X. Xxxx Xx., #000
Xxxx Xxxx, XX 00000
Telephone (000) 000-0000
Facsimile (000) 000-0000
EXHIBIT Q
PUT CANCELLATION NOTICE CONFIRMATION
The undersigned Investor to that certain Investment Agreement (the "Investment
Agreement") by and between the Company, and Xxxxxx Private Equity, LLC dated on
or about June 3, 1999, hereby confirms receipt of Alottafun!, Inc.'s (the
"Company") Put Cancellation Notice, and confirms the following:
Date of this Confirmation: ________________
Put Cancellation Date : ___________________
INVESTOR(S)
-----------------------------------
Investor's Name
By: ________________________________
(Signature)
Address:____________________________________
------------------------------------
------------------------------------
Telephone No.: ___________________________________
Facsimile No.: ____________________________________
EXHIBIT S
