EX-3.8
LOAN AGREEMENT
FEBRUARY 12, 2004
This Loan Agreement ("Agreement") is made and entered into to be
effective upon execution by and among Utix Group, Inc., a Delaware corporation
with an address at 000 Xxxxxxxxx Xxxxxx, Xxxxxxxxxx, XX 00000-0000 (the
"Borrower"), Corporate Sports Incentives, Inc., a New Hampshire corporation with
an address at 000 Xxxxxxxxx Xxxxxx, Xxxxxxxxxx, XX 00000-0000 ("CSI" or the
"Guarantor"), and the lenders who are signatories hereto, each with an address
as set forth opposite their names on SCHEDULE A attached hereto (each a "Lender"
and collectively, the "Lenders"), as follows:
WHEREAS, the Borrower plans to raise financing by filing a Form SB-2
registration statement with the Securities and Exchange Commission (the
"Commission");
WHEREAS, in the interim, the Borrower needs funds for information
technology systems upgrades, web site development, magnetic strip ticket
development, Microsoft Great Plains integration with Wildcard and
DISCOVER/Novus, initial brand development and early placement testing at retail
and specialty stores; and
WHEREAS, each Lender has agreed to lend to Borrower the Loan (as
defined hereinafter) pursuant to the terms of this Agreement and the Note (as
defined hereinafter).
NOW THEREFORE, for good and valuable consideration, the parties
hereto, intending to be legally bound, agree as follows
1. LOAN AGREEMENT. Borrower hereby agrees to borrow from each Lender, and
each Lender hereby agrees to lend to Borrower, the amount set forth
opposite each Lender's name in SCHEDULE A attached hereto, pursuant to
the terms and conditions set forth hereunder and in the note that is
substantially in the form attached hereto as EXHIBIT A (the "Note"),
in an aggregate amount of up to One Million Dollars ($1,000,000) (the
"Loan").
a. FUNDING. The Loan will be funded no later than February 12, 2004
(the "Closing Date"). Each Lender shall either issue a certified
check made payable to "Utix Group, Inc." or wire their respective
Loan amount in immediately-available funds to a Xxxxxxx Xxxxx
money market account designated in writing by the Borrower.
b. WARRANT. In addition to the Note, each Lender shall be granted a
warrant, substantially in the form attached hereto as EXHIBIT B
(the "Warrant"), to purchase one share of common stock of the
Borrower for every one dollar ($1.00) of principal that the
Lender loans to the Borrower for $0.10 per share.
2. TERMS.
a. INTEREST. The Loan shall bear interest at a rate of seven percent
(7%) per annum. Interest will be paid semi-annually, commencing
on June 30, 2004 and on each December 31 and June 30 thereafter
until the principal amount and all accrued but unpaid interest
has been paid.
b. MATURITY. The Loan shall mature on the earlier of (i) November
30, 2004, (ii) the occurrence of an Event of Default (as defined
in the Note) in accordance with the procedures set forth in the
Note or (iii) the receipt by the Borrower of net proceeds in
excess of $3,000,000 from any debt or equity financing completed
prior to November 30, 2004 (the "Maturity Date"). The Borrower
and Lender agree that in the event that the Borrower does not
raise in excess of $3,000,000 from any debt or equity financing
completed prior to November 30, 2004, the Borrower may, in its
sole discretion, extend the Maturity Date for one additional
year; provided that the Borrower issues to the Lender an
additional warrant (the "Additional Warrant") for the same number
of shares of common stock issuable in the Warrant granted hereby.
The Additional Warrant shall contain the same terms as the
Warrant.
c. GUARANTEE. By signing this Agreement, CSI, which is a
wholly-owned subsidiary of the Borrower, hereby guarantees the
prompt payment of the principal of and interest on the Notes.
Guarantor agrees that it shall not be necessary for the holder of
the Notes to proceed in any manner against Borrower for the
payment of the Notes as a condition precedent to enforcing this
guarantee.
3. REPRESENTATIONS.
a. The Borrower represents and warrants to the Lenders as follows:
(i) GOOD STANDING. Borrower is a corporation duly organized,
validly existing, and in good standing under the laws of the
State of Delaware, dully authorized to conduct business and in
good standing under the laws of each jurisdiction where such
qualification is material to the conduct of business.
(ii) CORPORATE AUTHORITY. The Borrower has full power and
authority to enter into this Agreement, to borrow the funds, to
execute and deliver the Notes, and to incur the obligations
provided for herein, all of which have been duly authorized by
all proper and necessary corporate action. No consent or approval
of shareholders or of any public authority is required as a
condition to the validity of this Agreement.
(iii) BINDING AGREEMENT. This Agreement and the Notes, when
issued and delivered pursuant hereto for value received, shall
constitute the legal, valid, and binding obligation of the
Borrower in accordance with its terms, subject to bankruptcy and
insolvency laws and any other laws of general application
affecting the rights and remedies of creditors.
(b) The Guarantor represents and warrants to the Lenders as follows:
(i) GOOD STANDING. Guarantor is a corporation duly organized,
validly existing, and in good standing under the laws of the
State of New Hampshire, duly authorized to conduct business and
in good standing under the laws of each jurisdiction where such
qualification is material to the conduct of business.
(ii) CORPORATE AUTHORITY. The Guarantor has full power and
authority to enter into this Agreement, to guarantee the Loan,
and to incur the obligations provided for herein, all of which
have been duly authorized by all proper and necessary corporate
action. No consent or approval of shareholders or of any public
authority is required as a condition to the validity of this
Agreement.
(iii) BINDING AGREEMENT. This Agreement, when issued and
delivered pursuant hereto, shall constitute the legal, valid, and
binding obligation of the Guarantor in accordance with its terms,
subject to bankruptcy and insolvency laws and any other laws of
general application affecting the rights and remedies of
creditors.
4. AFFIRMATIVE COVENANTS. Until the payment in full of the Loan and
performance of all obligations of the Borrower and Guarantor
hereunder, unless otherwise indicated, each of the Borrower and the
Guarantor shall:
a. TAXES. Pay and discharge all taxes, assessments, and governmental
charges upon it, its incomes, and its properties prior to the
date on which penalties are attached thereto, unless and to the
extent only that such taxes shall be contested in good faith and
by appropriate proceedings by the Borrower or Guarantor, as
applicable.
b. INSURANCE. Maintain insurance with insurance companies reasonably
acceptable to the Lenders on such properties, in such amounts and
against such risks as is customarily maintained by similar
businesses operating within the same industry.
c. NOTICE OF CLAIMS. Notify Lenders of any claims made or legal
processes instituted against the properties or other assets of
Borrower or Guarantor, as applicable, within fifteen (15) days of
Borrower or Guarantor, as applicable, becoming aware of the
existence of such claim or legal
process. Agree to diligently work to resolve, in an efficient and
cost effective manner, such claims.
5. NEGATIVE COVENANTS. Until payment in full of the Loan and the
performance of all other obligations of the Borrower and Guarantor
hereunder, each of the Borrower and Guarantor shall not, from the date
hereof, except with the prior written consent of a majority (51%) of
the Lenders:
a. Make loans or advances to a person, firm or corporation, except
loans or advances made in the ordinary course of business.
b. Other than pursuant to the terms of this Agreement, issue, incur
or assume any indebtedness, nor become liable, whether as an
endorser, guarantor, surety, or otherwise for any debt or
obligation of any other person, firm, or corporation.
6. EVENTS OF DEFAULT. The amounts due hereunder shall become immediately
due and payable in full upon the occurrence of any one or more of the
following events of default (the "Events of Default").
a. Default in the payment of the principal and unpaid accrued
interest of the Loan when due and payable, whether at maturity or
otherwise. That is not cured within 10 days; or
b. Failure of a representation of Borrower or Guarantor to be true.
That is not cured within 30 days; or
c. Failure of Borrower or Guarantor to observe or perform any
material term, covenant, or agreement contained in this Agreement
that is not cured within 30 days, or the dissolution, termination
of existence, or business failure of the Borrower or Guarantor;
or
d. The institution by the Borrower or Guarantor of proceedings to be
adjudicated as bankrupt or insolvent, or the consent by it to
institution of bankruptcy or insolvency proceedings against it or
the filing by it of a petition or answer or consent seeking
reorganization or release under the federal Bankruptcy Act, or
any other applicable federal or state law, or the consent by it
to the filing of any such petition or the appointment of a
receiver, liquidator, assignee, trustee or other similar official
of the Borrower or Guarantor, or of any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or the taking of corporate action by the Borrower or
Guarantor in furtherance of any such action; or
e. If, within sixty (60) days after the commencement of an action
against the Borrower or Guarantor (and service of process in
connection therewith on
the Borrower or Guarantor) seeking any bankruptcy, insolvency,
reorganization, liquidation, dissolution or similar relief under
any present or future statute, law or regulation, such action
shall not have been resolved in favor of the Borrower or
Guarantor, as applicable, or all orders or proceedings thereunder
affecting the operations or the business of the Borrower or
Guarantor, as applicable, stayed, or if the stay of any such
order or proceeding shall thereafter be set aside, or if, within
sixty (60) days after the appointment without the consent or
acquiescence of the Borrower or Guarantor of any trustee,
receiver or liquidator of the Borrower or Guarantor, as
applicable, or of all or any substantial part of the properties
of the Borrower or Guarantor, as applicable, such appointment
shall not have been vacated; or
f. The cessation of Borrower's or Guarantor's business for more than
thirty (30) days.
7. ASSIGNMENT. No portion of the Loan shall be assignable to a third
party without the express written consent of the Borrower.
8. MISCELLANEOUS
a. This Agreement constitutes the entire agreement between the
Borrower, the Guarantor and the Lenders. No delay or failure on
the part of any Lender in the exercise of any power or right
shall operate as a waiver thereof nor shall any single or partial
exercise of the same preclude any other or further exercise
thereof or the exercise of any other power or right, and the
rights and remedies of Lenders are cumulative to and not
exclusive of remedies which they would otherwise have. No waiver,
consent or modification, or amendment of this Agreement shall be
effective as against the Lenders unless the same is in writing
and signed by the holders of at least a majority of the face
amount of all then outstanding Notes issued pursuant to this
Agreement. No such amendment, modification, wavier or consent
shall extend to or affect any obligation or right except to the
extent expressly provided for therein. All computations and
determinations of the assets and liabilities of Borrower or
Guarantor for the purpose of this Agreement shall be made in
accordance with generally accepted accounting principles
consistently applied, except as may be otherwise specifically
provided herein. Any notice, request or other communication
required or permitted hereunder shall be in writing and shall be
deemed to have been duly given on the date of service if
personally served on the party to whom such notice is to be
given, on the date of transmittal of service via telecopy to the
party to whom notice is to be given (with a confirming copy
delivered within 24 hours thereafter), or on the third day after
mailing if mailed to the party to whom notice is to be given, by
first class mail, registered or certified mail, postage prepaid,
or via a recognized overnight courier providing a receipt
for delivery and properly addressed to the parties at the
respective addresses of the parties as set forth herein . Any
party hereto may by notice so given change its address for future
notice hereunder.
b. This Agreement shall be binding upon Borrower and Guarantor and
their respective successors and assigns, and shall inure to the
benefit of the Lenders and the benefit of their respective
successors and assigns, including any subsequent holder or
holders of the Notes or any interest therein.
c. Borrower herby expressly waives any presentment, demand, protest
or other notice of any kind.
9. GOVERNING LAW. The laws of the State of New York shall govern this
Agreement.
10. SURVIVABILITY. Should any portion of this Agreement be voided by a
court of competent jurisdiction, all remaining clauses in the
Agreement shall remain in full force and effect.
[signature page follows]
Executed on the day and year below written. This Agreement may be executed in
any number of counterparts, each constituting an original, but altogether one
agreement. A facsimile or other copy of this Agreement shall be considered as
having the same effect and be equivalent to an original signed document.
Borrower:
Utix Group, Inc.
By:
------------------------------
Name:
Title:
Date:
-----------------------------
GUARANTOR:
Corporate Sports Incentives, Inc.
By:
------------------------------
Name:
Title:
Date:
-----------------------------
LENDERS:
By:
------------------------------
Name:
Title:
Date:
-----------------------------
SCHEDULE A
----------
LENDERS ADDRESS LOAN AMOUNT
Xxxxx Family Irrevocable 00 Xxxxxxxx Xxxxxxxxx, $150,000
Stock Trust Xxx Xxxxx, Xxx Xxxx 00000
Xxxxxxx Xxxxxxx Family 0 Xxxxxxx Xxxxx $100,000
Limited Partnership Xxxxxxxx, Xxx Xxxx 00000
Xxxxxxx Associates $100,000
EXHIBIT A
NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), NOR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE PLEDGED, SOLD, ASSIGNED OR TRANSFERRED UNLESS (I) A REGISTRATION
STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAW REQUIREMENTS HAVE BEEN MET OR (II) UTIX GROUP,
INC. RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO UTIX GROUP, INC.
THAT EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT AND
THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF APPLICABLE STATE SECURITIES
LAWS ARE AVAILABLE.
No. __ $__________
UTIX GROUP, INC.
PROMISSORY NOTE
February 12, 2004
UTIX GROUP, INC., a Delaware corporation (the "Company") with an address
at 000 Xxxxxxxxx Xxxxxx, Xxxxxxxxxx, XX 00000-0000, for value received hereby
promises to pay to ______________________________ (the "Holder"), or its
registered assigns, the sum of ___________________________ ($_______), or such
lesser amount as shall then be outstanding hereunder. The principal amount
hereof and any unpaid accrued interest hereon, as set forth below, shall be due
and payable on November 30, 2004 (the "Maturity Date").
All or a portion of the principal amount of this Note shall be subject to
mandatory prepayment (pro-rata with other notes, dated of even date, aggregating
$200,000 (with this Note, collectively, the "Notes"), in the event and to the
extent that the Company shall, prior to the Maturity Date, receive net proceeds
in excess of $3,000,000 from any debt or equity financing.
If for any reason the Company shall be unable to pay the entire Note on
the Maturity Date, the Company shall have the right to extend the Maturity Date
of this Note for up to one year beyond November 30, 2004; provided that the
Company shall, simultaneous with any such extension, issue to the Holder an
additional warrant (the "Additional Warrant") for the same number of shares of
common stock issuable as in the Warrant granted pursuant to the Loan Agreement
(defined below).
Payment for all amounts due hereunder shall be made by mail to the
registered address of the Holder. This Note is issued in connection with the
Loan Agreement between the Company, Corporate Sports Incentives, Inc., a New
Hampshire corporation, as guarantor ("CSI" or the "Guarantor"), and the Lenders
who are signatories thereto, dated January 2004, as the same may from time to
time be amended, modified or supplemented (the "Loan Agreement"). The Holder of
this Note is subject to certain restrictions set forth in the Loan Agreement and
shall be entitled to certain rights and privileges set forth in the Loan
Agreement. This Note is one of the Notes referred to as the "Notes" in the Loan
Agreement. Capitalized terms used but not defined herein shall have the meanings
assigned to them in the Loan Agreement.
The following is a statement of the rights of the Holder of this Note and
the conditions to which this Note is subject, and to which the Holder hereof, by
the acceptance of this Note, agrees:
1. DEFINITIONS. As used in this Note, the following terms, unless the
context otherwise requires, have the following meanings:
(i) "Company" includes any corporation which shall succeed to
or assume the obligations of the Company under this Note.
(ii) "Holder," when the context refers to a holder of this Note,
shall mean any person who shall at the time be the registered holder of
this Note.
2. INTEREST. Commencing on June 30, 2004, and on each December 31 and
June 30 thereafter until all outstanding principal and interest on this Note
shall have been paid in full, the Company shall pay interest at the rate of
seven percent (7%) per annum (the "Interest Rate") on the principal of this Note
outstanding during the period beginning on the date of issuance of this Note and
ending on the date that the principal amount of this Note becomes due and
payable.
3. EVENTS OF DEFAULT. If any of the events specified in this Section
3 shall occur and be continuing (herein individually referred to as an "Event of
Default"), the Holder of the Note may, so long as such condition exists, declare
the entire principal and unpaid accrued interest hereon immediately due and
payable.
(i) Default in the payment of the principal and unpaid accrued
interest of this Note when due and payable, whether on the Maturity Date
or otherwise, that is not cured within 10 days of the date such payment
shall be due;
(ii) Breach by the Company or the Guarantor of any
representation or warranty contained in the Loan Agreement, that (if
capable of cure) shall not be cured within 30 days of notice of such
breach ;
(iii) Failure of the Company or the Guarantor to observe or
perform any material term, covenant, or agreement contained in the Loan
Agreement that is not cured within 30 days of notice, or the dissolution,
termination of existence, or business failure of the Company or the
Guarantor;
(iv) The institution by the Company or the Guarantor of
proceedings to be adjudicated as bankrupt or insolvent, or the consent by
it to institution of bankruptcy or insolvency proceedings against it or
the filing by it of a petition or answer or consent seeking
reorganization or release under the federal Bankruptcy Act, or any other
applicable federal or state law, or the consent by it to the filing of
any such petition or the appointment of a receiver, liquidator, assignee,
trustee or other similar official of the Company or the Guarantor, or of
any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the taking of corporate
action by the Company or the Guarantor in furtherance of any such action;
or
(v) If, within sixty (60) days after the commencement of an
action against the Company or the Guarantor (and service of process in
connection therewith on the Company or the Guarantor) seeking any
bankruptcy, insolvency, reorganization, liquidation, dissolution or
similar relief under any present or future statute, law or regulation,
such action shall not have been resolved in favor of the Company or the
Guarantor, as applicable, or all orders or proceedings thereunder
affecting the operations or the business of the Company or the Guarantor,
as applicable, stayed, or if the stay of any such order or proceeding
shall thereafter be set aside, or if, within sixty (60) days after the
appointment without the consent or acquiescence of the Company or the
Guarantor of any trustee, receiver or liquidator of the Company or the
Guarantor, as applicable, of all or any substantial part of the
properties of the Company or Guarantor, as applicable, such appointment
shall not have been vacated; or
(vi) The cessation of the Company's or Guarantor's business for
more than thirty (30) days.
4. GUARANTEE. The indebtedness evidenced by this Note is
unconditionally guaranteed by CSI, a wholly-owned subsidiary of the Company.
5. PREPAYMENT. Prior to the Maturity Date, this Note may be prepaid
by the Company, without prepayment penalty, upon twenty (20) days' prior written
notice to the Holder, at any time, in whole or in part.
6. ASSIGNMENT. Subject to the restrictions on transfer described in
Section 8 below, the rights and obligations of the Company and the Holder of
this Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.
7. WAIVER AND AMENDMENT. Any provision of this Note may be amended,
waived or modified upon the written consent of the Company and the Lender.
8. TRANSFER OF THIS NOTE. With respect to any offer, sale or other
disposition of this Note, the Holder will give written notice to the Company
prior thereto, describing briefly the manner thereof, together with a written
opinion of such Holder's counsel reasonably acceptable to the Company, to the
effect that such offer, sale or other distribution may be effected without
registration or qualification (under any federal or state law then in effect).
Promptly upon receiving such written notice and reasonably satisfactory opinion,
if so requested, the Company shall notify such Holder that such Holder may sell
or otherwise dispose of this Note, all in accordance with the terms of the
notice delivered to the Company. If a determination has been made pursuant to
this Section 8 that the opinion of counsel for the Holder is not reasonably
satisfactory to the Company, the Company shall so notify the Holder promptly
after such determination has been made. Each Note thus transferred and each
certificate representing the securities thus transferred shall bear a legend as
to the applicable restrictions on transferability in order to ensure compliance
with the Securities Act, unless in the opinion of counsel for the Company such
legend is not required. The Company may issue stop transfer instructions to its
transfer agent in connection with such restrictions.
9. NOTICES. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given on the date of service if personally served on the party to whom such
notice is to be given, on the date of transmittal of service via telecopy to the
party to whom notice is to be given (with a confirming copy delivered within 24
hours thereafter), or on the third day after mailing if mailed to the party to
whom notice is to be given, by first class mail, registered or certified mail,
postage prepaid, or via a recognized overnight courier providing a receipt for
delivery and properly addressed at the respective addresses of the parties as
set forth herein. Any party hereto may by notice so given change its address for
future notice hereunder.
10. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, excluding that body of law
relating to conflict of laws.
11. HEADING; REFERENCES. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
Except where otherwise indicated, all references herein to Sections refer to
Sections hereof.
IN WITNESS WHEREOF, the Company has caused this Note to be issued this
_____ day of February, 2004.
UTIX GROUP, INC.
By:
-------------------------------------
Name: Xxxxxxx Xxxx
Title: President and CEO
The undersigned corporation does hereby unconditionally and irrevocable guaranty
the full payment and performance by the Company of all of its obligations under
the above Note.
Corporate Sports Incentives, Inc.
By:
---------------------------------------
Name: Xxxxxxx Xxxx,
Title: President and CEO
EXHIBIT B
WARRANT
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED OR OTHERWISE
DISPOSED OF, UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF THE SECURITIES ACT
OR AN OPINION OF COUNSEL IS OBTAINED STATING THAT SUCH DISPOSITION IS IN
COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION.
FEBRUARY 12, 2004
UTIX GROUP, INC.
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
No. W-E(_)
For value received, this Warrant is hereby issued by Utix Group, Inc., a
Delaware corporation (the "Company"), to ______________________ (the "Holder").
Subject to the provisions of this Warrant, the Company hereby grants to Holder
the right to purchase from the Company _______ fully paid and non-assessable
shares of Common Stock, at a price of $0.10 per share (the "Exercise Price").
The term "Common Stock" means the Common Stock, par value $0.001 per
share, of the Company as constituted on February 6, 2004 (the "Base Date"). The
number of shares of Common Stock to be received upon the exercise of this
Warrant may be adjusted from time to time as hereinafter set forth. The shares
of Common Stock deliverable upon such exercise, and as adjusted from time to
time, are hereinafter referred to as "Warrant Stock."
The Holder agrees with the Company that this Warrant is issued, and all
the rights hereunder shall be held, subject to all of the conditions,
limitations and provisions set forth herein.
1. EXERCISE OF WARRANT. Subject to the terms and conditions set forth
herein, this Warrant may be exercised in whole or in part, pursuant to the
procedures provided below, at any time on or before the earlier of (i) 5:00
p.m., Eastern time, on February 12, 2009 (the "Expiration Date") or, if such day
is a day on which banking institutions in New York are authorized by law to
close, then on the next succeeding day that shall not be such a day. To exercise
this Warrant the Holder shall present and surrender this Warrant to the Company
at its principal office, with the Warrant Exercise Form attached hereto duly
executed by the Holder and accompanied by payment in cash, wire transfer or by
check, payable to the order of the Company, of the aggregate Exercise Price for
the total aggregate number of shares for which this Warrant is exercised. Upon
receipt by the Company of this Warrant, together with the executed Warrant
Exercise Form and payment of the Exercise Price for the shares to be acquired,
in proper form for exercise, and subject to the Holder's compliance with all
requirements of this Warrant for the exercise hereof, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be actually delivered to the Holder; PROVIDED, HOWEVER, that no
exercise of this Warrant shall be effective, and the Company shall have no
obligation to issue any Common Stock to the Holder upon any attempted exercise
of this Warrant, unless the Holder shall have first delivered to the Company, in
form and substance reasonably satisfactory to the Company, appropriate
representations so as to provide the Company reasonable assurances that the
securities issuable upon exercise may be issued without violation of the
registration requirements of the Securities Act and applicable state securities
laws, including without limitation representations that the Holder is familiar
with the Company and its business and financial condition and has had an
opportunity to ask questions and receive documents relating thereto to his
reasonable satisfaction.
2. NET ISSUE EXERCISE. Notwithstanding any provisions herein to the
contrary, if the fair market value of one share of Common Stock is greater than
the Exercise Price (at the date of calculation as set forth below), in lieu of
exercising this Warrant for cash, the Holder may elect to receive shares equal
to the value (as determined below) of this Warrant (or the portion thereof being
canceled) by surrender of
this Warrant at the principal office of the Company together with the properly
endorsed Notice of Exercise and notice of such election in which event the
Company shall issue to the Holder a number of shares of Common Stock computed
using the following formula:
X = Y (A-B)
-----------
A
Where X = the number of shares of Common Stock to be issued to
the Holder
Y = the number of shares of Common Stock purchasable
under the Warrant or, if only a portion of the
Warrant is being exercised, the portion of the
Warrant being canceled (at the date of such
calculation)
A = the fair market value of one share of the Company's
Common Stock (at the date of such calculation)
B = Exercise Price (as adjusted to the date of such
calculation)
3. RESERVATION OF SHARES. The Company will at all times reserve for
issuance and delivery upon exercise of this Warrant all shares of Common Stock
from time to time receivable upon exercise of this Warrant. All such shares
shall be duly authorized and, when issued upon such exercise, shall be validly
issued, fully paid and non-assessable and free of all preemptive rights.
4. FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant, but the
Company shall pay the Holder an amount equal to the Fair Market Value (as
defined below) of such fractional share of Common Stock in lieu of each fraction
of a share otherwise called for upon any exercise of this Warrant.
5. FAIR MARKET VALUE. For purposes of this Warrant, the Fair Market
Value of a share of Common Stock shall be determined as of any date (the "Value
Date") by the Company's Board of Directors in good faith; provided, however,
that where there exists a public market for the Company's Common Stock on the
Value Date, the fair market value per share shall be either:
(a) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange or
listed for trading on the NASDAQ system, the Fair Market Value shall be
the last reported sale price of the security on such exchange or system
on the last business day prior to the Value Date or if no such sale is
made on such day, the average of the closing bid and asked prices for
such day on such exchange or system; or
(b) If the Common Stock is not so listed or so admitted to
unlisted trading privileges, the Fair Market Value shall be the mean of
the last reported bid and asked prices reported by the National Quotation
Bureau, Inc. on the last business day prior to the Value Date.
6. REDEMPTION AT OPTION OF COMPANY. This Warrant is subject to
redemption, at the option of the Company upon thirty days advance notice by the
Company to the Holder, for $0.01 per Warrant Share, if: (i) the Common Stock is
trading on the NASD Over-the-Counter Bulletin Board; (ii) the Warrant Shares
have been registered for sale under the Securities Act of 1933, as amended, or
are otherwise available for resale under a Rule 144 exemption; and (iii) the
average closing price of the Common Stock during the thirty days prior to the
giving of notice to the Holder equals or exceeds $0.30 per share. The Holder
shall have the right to exercise this Warrant, in whole or in part, following
receipt of such notice of redemption and prior to the date fixed for redemption
of this Warrant.
7. REGISTRATION RIGHTS. The Company shall register the Warrant Shares
in a Form SB-2 registration statement that the Company will file with the
Securities and Exchange Commission.
8. ASSIGNMENT OR LOSS OF WARRANT. Subject to the transfer
restrictions herein (including Section 11), upon surrender of this Warrant to
the Company or at the office of its stock transfer agent, if any, with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
transfer tax, the Company shall, without charge, execute and deliver a new
Warrant in the name of the assignee named in such instrument of assignment and
this Warrant shall promptly be canceled. Upon receipt by
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the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and of reasonably satisfactory
indemnification by the Holder, and upon surrender and cancellation of this
Warrant, if mutilated, the Company shall execute and deliver a replacement
Warrant of like tenor and date.
9. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or in
equity, and the rights of the Holder are limited to those expressed in this
Warrant.
10. ADJUSTMENTS.
10.1 ADJUSTMENT FOR RECAPITALIZATION. If the Company shall at
any time after the Base Date subdivide its outstanding shares of Common Stock by
recapitalization, reclassification or split-up thereof, the number of shares of
Common Stock subject to this Warrant immediately prior to such subdivision shall
be proportionately increased, and if the Company shall at any time after the
Base Date combine the outstanding shares of Common Stock by recapitalization,
reclassification or combination thereof, the number of shares of Common Stock
subject to this Warrant immediately prior to such combination shall be
proportionately decreased. Any such adjustment and adjustment to the Exercise
Price pursuant to this Section 10.1 shall be effective at the close of business
on the effective date of such subdivision or combination.
Whenever the number of shares of Common Stock purchasable upon the
exercise of this Warrant is adjusted, as provided in this Section 10.1, the
Exercise Price shall be adjusted to the nearest cent by multiplying such
Exercise Price immediately prior to such adjustment by a fraction (x) the
numerator of which shall be the number of shares of Common Stock purchasable
upon the exercise immediately prior to such adjustment, and (y) the denominator
of which shall be the number of shares of Common Stock so purchasable
immediately thereafter.
10.2 ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
In case of any reorganization of the Company after the Base Date or in case
after such date the Company shall consolidate with or merge into another
corporation or convey all or substantially all of its assets to another
corporation, then, and in each such case, the Holder of this Warrant upon the
exercise thereof as provided in Section 1 at any time after the consummation of
such reorganization, consolidation, merger or conveyance, shall be entitled to
receive, in lieu of the securities and property receivable upon the exercise of
this Warrant prior to such consummation, the securities or property to which
such Holder would have been entitled upon such consummation if such Holder had
exercised this Warrant immediately prior thereto; in each such case, the terms
of this Warrant shall be applicable to the securities or property receivable
upon the exercise of this Warrant after such consummation.
10.3 ADJUSTMENT FOR SHARE ISSUANCES. If the Company shall at any
time prior to the exercise of this Warrant issue any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock
("Equivalents") to a person other than the Holder (except (A) pursuant to
Sections 10.1 or 10.2 hereof or (B) pursuant to options, warrants, or other
obligations to issue shares outstanding on the date hereof ("NEW SHARES")) for a
consideration per share or having an exercise, conversion or exchange price (the
"OFFER PRICE") of less than $0.30 per share, then the Exercise Price shall be
immediately reset to a price determined by (calculated to the nearest tenth of a
cent) multiplying such Exercise Price by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such issue plus the number of shares of Common Stock which the aggregate
consideration received by the Company for the total number of Additional Shares
(as defined below) of Common Stock so issued would purchase at such Exercise
Price; and the denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the number of such
Additional Shares of Common Stock so issued. For purposes of this Section,
"ADDITIONAL SHARES" of Common Stock shall mean all shares of Common Stock issued
by the Company after the date hereof, other than shares of Common Stock issuable
at any time:
(a) upon conversion or exercise of all options and convertible
securities outstanding as of the date hereof; and
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(b) to officers, directors, and employees of, and consultants
to, the Company on terms approved by the Board of Directors, in
connection with business combinations or corporate partnering agreements
approved by the Board of Directors.
For purposes hereof, the issuance of any security of the Company convertible
into or exercisable or exchangeable for Common Stock shall result in an
adjustment to the Exercise Price at the time of issuance of such securities.
(a) In the case of the issuance of New Shares for a
consideration in whole or in part for cash, the consideration received by
the Company upon such issuance will be deemed to be the amount of cash
paid therefor plus the value of any property other than cash received by
the Company.
(b) In the case of the issuance of New Shares for a
consideration in whole or in part in property other than cash, the value
of such property other than cash will be deemed to be the fair market
value of such property as determined by an independent appraiser with
experience in such valuations, selected by the Holder at Company's sole
cost and expense, irrespective of any accounting treatment.
(c) In the case of the issuance of Equivalents, the aggregate
maximum number of shares of New Stock deliverable upon exercise, exchange
or conversion, as the case may be, of such Equivalents will be deemed to
have been issued at the time such Equivalents were issued and for a
consideration equal to the consideration, if any, received by the Company
upon the issuance of such Equivalents plus the maximum purchase price
provided in such Equivalents.
10.4 CERTIFICATE AS TO ADJUSTMENTS. The adjustments provided in
this Section 10 shall be interpreted and applied by the Company in such a
fashion so as to reasonably preserve the applicability and benefits of this
Warrant (but not to increase or diminish the benefits hereunder). In each case
of an adjustment in the number of shares of Common Stock receivable on the
exercise of the Warrant, the Company at its expense will promptly compute such
adjustment in accordance with the terms of the Warrant and prepare a certificate
executed by two executive officers of the Company setting forth such adjustment
and showing in detail the facts upon which such adjustment is based. The Company
will forthwith mail a copy of each such certificate to each Holder.
10.5 NOTICES OF RECORD DATE, ETC. In the event that:
(a) the Company authorizes the granting to Common Stock holders
of any right to subscribe for, purchase or otherwise acquire any shares
of stock of any class or any other securities; or
(b) the Company authorizes any capital reorganization of the
Company, any reclassification of the capital stock of the Company, any
consolidation or merger of the Company with or into another corporation,
or any conveyance of all or substantially all of the assets of the
Company to another corporation or entity; or
(c) the Company authorizes any voluntary or involuntary
dissolution, liquidation or winding up of the Company,
then, and in each such case, the Company shall mail or cause to be mailed to the
holder of this Warrant at the time outstanding a notice specifying, as the case
may be, (i) the date on which a record is to be taken for the purpose of such
right, and stating the amount and character of such right, or (ii) the date on
which such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding up is to take place, and the time, if any is
to be fixed, as to which the holders of record of Common Stock shall be entitled
to exchange their shares of Common Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
conveyance,
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dissolution, liquidation or winding up. Such notice shall be mailed at least
twenty (20) days prior to the date therein specified.
10.6 NO IMPAIRMENT. The Company will not, by any voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
to be observed or performed hereunder by the Company, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 10
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the Holder of this Warrant against impairment.
11. TRANSFER TO COMPLY WITH THE SECURITIES ACT. This Warrant and any
Warrant Stock may not be sold, transferred, pledged, hypothecated or otherwise
disposed of except as follows: (a) to a person who, in the opinion of counsel to
the Company, is a person to whom this Warrant or the Warrant Stock may legally
be transferred without registration and without the delivery of a current
prospectus under the Securities Act with respect thereto and then only against
receipt of an agreement of such person to comply with the provisions of this
Section 11 with respect to any resale or other disposition of such securities;
or (b) to any person upon delivery of a prospectus then meeting the requirements
of the Securities Act relating to such securities and the offering thereof for
such sale or disposition, and thereafter to all successive assignees.
12. LEGEND. Unless the shares of Warrant Stock have been registered
under the Securities Act, upon exercise of any of the Warrants and the issuance
of any of the shares of Warrant Stock, all certificates representing shares
shall bear on the face thereof substantially the following legend:
The securities represented by this
certificate have not been registered under the
Securities Act of 1933, as amended, and may not be
sold, offered for sale, assigned, transferred or
otherwise disposed of, unless registered pursuant to
the provisions of that Act or unless an opinion of
counsel to the Corporation is obtained stating that
such disposition is in compliance with an available
exemption from such registration.
13. NOTICES. All notices required hereunder shall be in writing and
shall be deemed given when telegraphed, delivered personally or within two days
after mailing when mailed by certified or registered mail, return receipt
requested, to the Company or the Holder, as the case may be, for whom such
notice is intended, if to the Holder, at the address of such party shown on the
books of the Company, or if to the Company, at the address set forth on the
signature page hereof, Attn: President, or at such other address of which the
Company or the Holder has been advised by notice hereunder.
14. APPLICABLE LAW. The Warrant is issued under and shall for all
purposes be governed by and construed in accordance with the laws of the State
of New York, without regard to the conflict of laws provisions of such State.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed on
its behalf, in its corporate name, by its duly authorized officer, all as of the
day and year first above written.
UTIX GROUP, INC.
By:
---------------------------------
Name:
Title:
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WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to (i) exercise the within
Warrant to purchase __________ shares of the Common Stock of Utix Group, Inc., a
Delaware corporation, pursuant to the provisions of Section 1 of the attached
Warrant, and hereby makes payment of $__________ in payment therefor, or (ii)
exercise this Warrant for the purchase of _______ shares of Common Stock,
pursuant to the provisions of Section 2 of the attached Warrant. The
undersigned's execution of this form constitutes the undersigned's agreement to
all the terms of the Warrant and to comply therewith.
----------------------------------------
Signature
Print Name:
----------------------------------------
Signature, if jointly held
Print Name:
----------------------------------------
Date
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ASSIGNMENT FORM
FOR VALUE RECEIVED_____________________________ ("Assignor") hereby sells,
assigns and transfers unto _______________________________ ("Assignee") all of
Assignor's right, title and interest in, to and under Warrant No. W-____ issued
by Utix Group Inc., dated ______________.
DATED:
-----------------------------
ASSIGNOR:
----------------------------------------
Signature
Print Name:
----------------------------------------
Signature, if jointly held
Print Name:
Assignee:
The undersigned agrees to all of the terms of the Warrant and to comply
therewith.
----------------------------------------
Signature
Print Name:
----------------------------------------
Signature, if jointly held
Print Name:
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